The Mexican peso rebounded toward 17.8 per US dollar as a broad pullback in the US currency and rising expectations of a ceasefire in the Middle East revived demand for riskier assets. The peso had come under pressure last month amid a weakening carry trade and heightened safe-haven flows into the dollar, but it has since recovered as the greenback lost ground on signs of potential de‑escalation.
President Donald Trump indicated the conflict with Iran could be resolved within weeks and signaled a willingness for the US to reduce its direct involvement, tempering the urgency for safety in the dollar.
Despite the rebound, the peso remains vulnerable to narrowing interest rate differentials after Banco de México recently cut its benchmark rate to 6.75%, while the Federal Reserve has kept its policy stance unchanged. Although previously supported by relatively high domestic rates, the currency now faces investors’ reassessment of policy divergence and the risk that any setback in confirming a regional resolution could quickly restore demand for the US dollar.
