The Mexican peso opens strongly for the second week in a rowbelow $17 pesos for each dollar.
The previous week, the dollar added a setback to the be quoted at $16.75 pesos per dollara similar figure with which it opened this Monday, something that has not surprised analysts, who recognize that the “super peso” is having a positive effect on the projections of the Mexican economy.
There are several factors that are considered to evaluate the behavior of a currency, so in addition to the strength of the economy in Mexico, the high interest rates in the United States are also considered.
In that sense, It is estimated that by the end of 2023, the weight will increase slightly; while in 2024, when the Federal Reserve could reduce interest rates, the Mexican currency reaches a price of just over $18 pesos per dollar.
“The rate differential leads to the appreciation of the peso, but I don’t think that’s the most important thing. Rather, I think it’s the expectations that the Mexican economy can grow more,” said Gabriela Siller, head of analysis at Banco Base de Mexico, according to a WSJ report.
Bank of America has insisted that the peso’s recent gains are due to US interest rates.
“While the peso could remain strong in the short term thanks to the resilience of the United States, we believe that all risks are to the downside,” Bank of America Global Research said in late June.
Mexico is undergoing a major economic transformationlargely due to the so-called ‘nearshoring’ or business relocation, to avoid a crisis in supply chains similar to the one caused during the COVID-19 pandemic.
It is estimated that the Mexican currency has appreciated by 13% against the dollar in the last year, marking its best period for almost 10 years.
the mexican president Andres Manuel Lopez Obrador has highlighted the advance of the Mexican currency.
“This hasn’t happened in decades,” he said a few days ago.
The behavior of the Mexican economy and the peso has been a blow to critics of Lopez Obrador, whom they describe as “nationalist”, but who has promoted important investments in the country, such as the new Tesla plant.
The Ministry of Economy of Mexico reports that, during the first quarter of 2023, Foreign Direct Investment (FDI) was $18.636 million dollars or 48% more than the quarter of the previous year.
The drop in the price of the dollar has, however, some negative effects, such as the immigrants need to send more remittances to their familiess, as well as less interest in real estate investments in Mexico and greater caution even on vacation.
Some financial institutions, such as Swiss Bank, point out that it is difficult for the dollar to fall much lower against the Mexican peso.
Keep reading:
· Mexican peso surprises with more gains against dollar
· Why the Mexican “superpeso” is the most liquid currency in Latin America and what does this have to do with its strength against the dollar
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Source: La Opinion
