FX.co ★ Mexican Peso Gives Back Over 1-Year High

The Mexican peso has modestly declined to approximately 18.3 per US dollar, pulling back from its peak level since July 2024, which was 18.17 recorded on December 5th. This shift has been influenced by rising US yields and a decreasing Mexican yield premium, steering investment interest towards the dollar. The yield on the 10-year US Treasury has risen above 4.15%, thereby enhancing the appeal of dollar-denominated assets to global investors. Concurrently, there is an expectation that Banco de México will continue its trend of monetary easing following a series of rate cuts this year, with market forecasts positioning the policy rate around the mid 7% range. This adjustment diminishes Mexico's carry advantage. In November 2025, the headline inflation stood at 3.80%, presenting challenges to the timing and magnitude of subsequent rate reductions but not deterring markets from anticipating further cuts. This scenario has compressed real interest rates, making the peso more susceptible to fluctuations. Additionally, recent downward adjustments in domestic economic activity and diminished growth forecasts have further weakened the case for fresh capital investments.