The Mexican peso appreciated sharply on Monday, bolstered by a weakened dollar and speculation that the incoming U.S. administration’s tariff plans may be narrower in scope than initially expected.

The USD/MXN closed the day at 20.3096 per dollar, compared to 20.6724 on Friday, according to official data from Banco de México (Banxico). This marks a gain of 36.28 cents, or 1.76%.

USD/MXN

During the session, the exchange rate ranged between a high of 20.6669 and a low of 20.2437 pesos per dollar.

The U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, fell 0.62% to 108.27 units, further supporting the peso’s rally.

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Markets reacted to a report by The Washington Post suggesting that the incoming Trump administration might limit new tariffs to imports deemed critical to U.S. national and economic security. Although Trump later denied the report, the peso maintained its gains throughout the day, aligning with a broader regional trend of currency strength.A Shift in

Tariff Expectations

If confirmed, this approach would significantly differ from Trump’s earlier rhetoric, which included threats of imposing broad tariffs on imports from Canada, Mexico, and China. The dollar’s weakness reflected market anticipation of this potential shift in policy.

The peso has regained more than 3% from its late-2024 peak of 20.91 pesos per dollar. While Monday’s appreciation was partly driven by speculation surrounding tariff policies, broader optimism regarding normalized capital flows also played a role.

Key Economic Data Ahead

The week ahead is packed with critical economic catalysts, including U.S. labor data, speeches by Federal Reserve officials, and inflation figures from Mexico. Banxico’s minutes from its recent monetary policy meeting will also be closely watched for insights into the central bank’s outlook.

Despite uncertainty surrounding U.S. trade policy, the peso’s performance reflects optimism about a more stable economic environment as markets await further clarity on the new administration’s plans.

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.