Record-Breaking Drop in Mexican Peso: Is the Dollar Price Dropping Below 17.00

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Published 16.06.2023 12:41 Updated 06.16.2023 13:06

© Reuters.

By Julio Sanchez Onofre – The dollar reached a new record low against the peso today, hitting levels not seen since 2015. At 1:00 p.m., the exchange rate stood at 17.03 pesos per dollar, marking a 0.4% intraday appreciation for the national currency. It is now on track to break the 17.00 units per dollar barrier.

Gabriela Siller Pagaza, the director of Economic and Financial Analysis at Banco Base, highlighted that since mid-2022, when the downward trend of the exchange rate began, there have been cycles of appreciation lasting around 2 months. During these cycles, the peso appreciates by approximately 7%, followed by a period of upward correction of about 5%.

According to Pagaza, if the exchange rate continues to fluctuate in this manner, it is expected to reach 16.74 pesos per dollar by mid-July, followed by a rebound towards 17.50 pesos per dollar.

The appreciation at noon coincided with the announcement from the Ministry of Finance and Public Credit (SHCP) that Fitch agency has reaffirmed Mexico’s long-term sovereign debt rating at BBB-, with a stable outlook.

As the US markets will be closed on Monday due to a holiday, market operators are adjusting their positions accordingly. This follows the Federal Reserve’s decision on Wednesday to keep the reference rate unchanged, but with indications of potential tightening in future meetings.

Janneth Quiroz Zamora, deputy director of Economic Analysis at Grupo Financiero Monex, stated that the Fed’s monetary pause in June will likely be followed by an increase in July, and possibly one more increase later this year.

Investors are also closely watching the upcoming meeting of the authorities, where interest rates are expected to remain unchanged. The focus will be on the tone of the meeting to adjust bets on when the cuts will begin.

With the noon appreciation, the Mexican peso is set to end the day with a weekly gain of 1.3%. So far in 2023, it has already appreciated by 12.4%.

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