FX.co ★ Mexican Peso Weakens Toward One-Year Low

The Mexican peso depreciated to around 18.4 per US dollar in October, approaching a one-year low and mirroring the broader advance of the US currency against other emerging-market units. The dollar’s strength has been supported by expectations of further monetary tightening by the Federal Reserve, as persistent inflationary pressures linked to tensions in the Middle East coincide with solid US economic performance. At the same time, the shrinking interest-rate differential is eroding the peso’s attractiveness. Narrower yield spreads between Mexico and advanced economies, together with expectations that Banxico will keep policy on hold, are weakening the appeal of peso-denominated carry trades.