FX.co ★ Mexican Peso Loses Ground

The Mexican peso has depreciated toward 18.5 per US dollar after nearing its peak level since July 2024, reaching 18.29 on September 16th. This decline follows less robust domestic activity and labor market signals, leading markets to anticipate further easing by Banxico and diminishing the currency’s attractiveness in terms of yields. Banxico recently decreased its policy rate to 7.5% on September 25th and indicated the possibility of additional cuts. This move has reduced Mexico’s interest rate advantage and lowered the demand for peso-denominated assets. In September, S&P Global’s manufacturing PMI fell to 49.6, and manufacturing business confidence lingered just below the neutral point at 49.7. These figures indicate a slowdown in new orders and an ongoing tepid investment climate, reinforcing the rationale for a more accommodating policy approach. The labor market also mirrors this trend of softness, with the unemployment rate increasing to 2.9% in August, marking the highest level since September 2024.