The Mexican peso appreciated significantly against the U.S. dollar on Friday, buoyed by favorable inflation data from the United States. These figures suggested that inflationary pressures are gradually aligning with the Federal Reserve’s (Fed) target, boosting optimism in financial markets.

The exchange rate closed at 20.0342 pesos per dollar, compared to 20.2984 pesos the previous day, based on official data from the Bank of Mexico (Banxico). This marked a gain of 26.42 centavos or 1.30%. During the session, the dollar traded within a range of 20.3750 pesos at its highest and 20.0217 pesos at its lowest.

USD/MXN

The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, fell by 0.64% to 107.71 points, reflecting broader market dynamics favoring emerging currencies.

Inflation and Interest Rates

The Personal Consumption Expenditures (PCE) price index—the Fed’s preferred inflation gauge—rose by 0.1% in November, below the 0.2% forecasted by analysts. Core PCE, which excludes volatile food and energy prices, also increased by 0.1%, falling short of expectations.

This data boosted market sentiment after the Fed’s midweek announcement, which scaled back expectations for 2025 rate cuts to just two, citing a resilient economy and persistent inflation.
Local Market Dynamics

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Meanwhile, local traders continued to digest Banxico’s recent rate cut and the prospects for additional policy adjustments as inflation in Mexico responds to these measures. The peso recovered from earlier losses incurred earlier in the week following the Fed’s announcement.

Compared to last week’s closing rate of 20.1281 pesos, the peso gained 9.39 centavos or 0.47% over the week.

Year-End Market Volatility

Some traders attributed recent currency movements to the typical year-end market volatility, with thinner trading volumes amplifying price fluctuations. Participants are also processing the latest monetary policy decisions from both the Fed and Banxico.

“December’s volatility reflects low liquidity in the market. With fewer participants, even small positions can significantly move prices,” noted a local market analyst.

The peso’s strength underscores both the resilience of Mexico’s economic fundamentals and the impact of shifting global monetary policies.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.