Mexican Peso Hits 15-month Low

The Mexican peso weakened to around 18.8 per US dollar after Banxico lowered its benchmark interest rate by 25 bps to 6.25% at its November 2026 meeting, defying market expectations for a hold. The central bank noted that the disinflation process had continued and judged that prevailing economic slack would limit the pass-through of exchange rate movements to consumer prices. It also indicated that keeping rates at the new level for an extended period would support inflation convergence towards its target while helping address external macroeconomic challenges. The narrower interest rate differential between Banxico and the US Federal Reserve reduces the attractiveness of peso-denominated carry trades, weighing on the currency. The peso also surrendered some of its gains following the Democratic Party's victory in the US midterm elections, as markets viewed the outcome as a potential constraint on the Trump administration's ability to maintain elevated tariffs on foreign trade.

The Mexican Peso touched 18.94 against the USD, the lowest since August 2025. Over the past 4 weeks, US Dollar Mexican Peso gained 4.08%, and in the last 12 months, it increased 0.74%.

The Mexican peso strengthened to around 18.6 per US dollar in October, supported by expectations of a widening US-Mexico interest rate differential. The Federal Reserve left rates unchanged at its October meeting as expected, while Banxico is seen adopting a more hawkish stance at its November meeting. Nevertheless, the peso remains near its weakest levels since mid-2025, following a sharp unwinding of carry trades as the interest rate differential between the Fed and Banxico narrowed. The Fed raised its policy rate to 3.75%–4.00% in September, while Banxico kept its benchmark rate at 6.50%, leaving the spread at 250 basis points, reportedly a historic low. Expectations that the Fed could keep rates higher for longer, alongside a stronger US dollar and elevated risk aversion, have also weighed on the peso, which has depreciated by more than 9% since the beginning of September.