FX.co ★ Mexican Peso Weakens Amid USD Strength

The Mexican peso has depreciated beyond the 19.6 per USD mark as the 90-day US–China tariff truce has spurred renewed interest in US assets, thereby enhancing the appeal of the dollar. Concurrently, Banxico is anticipated to reduce the benchmark rate by an additional 50 basis points this Thursday. This ongoing policy easing further diminishes Mexico’s rate differential with the Federal Reserve, eroding the peso's attractiveness as a carry trade. Additionally, the currency faces downward pressure from persistent 25% US tariffs on Mexican steel, aluminum, and automobiles, escalating export costs and undermining industrial competitiveness, despite a modest 1.9% year-on-year gain in March industrial output. As global market flows bolster the dollar and Banxico’s dovish stance widens the policy gap, capital continues to pursue higher real yields abroad, putting sustained pressure on the peso. This is occurring even amidst some support from stronger commodity exports and recent fiscal initiatives aimed at strengthening household demand.