FX.co ★ Mexican Peso Extends Rally

The Mexican peso strengthened towards 18.3 per US dollar, nearing its peak level since July 2024 of 18.29, recorded on September 16th. This uptrend was driven by clear guidance from Banxico and a slightly weakened US dollar, reducing external pressures on the currency. Banxico recently lowered the policy interest rate by 25 basis points to 7.50% with a four-to-one vote, describing this adjustment as both calibrated and contingent. The central bank emphasized a data-dependent, gradual approach to easing, which reassured investors that inflation risks remain under surveillance and that any shifts in policy will not be abrupt. Meanwhile, Mexico's unemployment rate edged up slightly to 2.9% in August, indicating some slack in the labor market but not suggesting severe deterioration. This condition supports the perspective that real returns on peso assets will continue to be attractive. Concurrently, concerns about a potential US government shutdown and weaker US economic data have lessened the demand for the dollar as a safe haven, thereby reducing the pressure on emerging market currencies, including the peso.