Mexican peso falls for 6 straight weeks: dollar at 18.49 pesos
WHAT HAPPENED
The dollar reached 18.49 pesos, and the peso has now lost value for six straight weeks. Six weeks ago, it was below 18 pesos. The weakness is happening as the Fed keeps rates high and Banxico considers lowering its rate, currently at 6.50%.
WHY IT MATTERS
When Mexico pays much more interest than the United States, investing in pesos is attractive. If that gap narrows, some investors sell pesos and buy dollars. That is why the costs of imports, travel, software, electronics, and cars rise first; finished products may also become more expensive.
AND FOR YOUR PORTFOLIO
For an individual, something that cost 100 dollars went from about 1,800 to 1,849 pesos, even though its dollar price did not change. Traveling or paying for U.S. services costs more. By contrast, each dollar in remittances converts to more pesos. The exchange rate can also affect prices at importing companies.
💬 TELL IT LIKE THIS
“The peso is weakening because it now offers a smaller advantage over the dollar; that makes imports more expensive and increases the value of remittances in pesos.”