The Mexican Peso weakened in August, posting its first monthly decline this year. Losses have extended in September so far. Economists at Scotiabank analyze MXN’s outlook.
Potential for rate cuts to start late this year may be encouraging profit-taking
Mexican yields remain attractive, but investors may be reducing exposure to the MXN after a solid run to multi-year highs against the USD (which is down more than 13% against the MXN over the past year).
Domestic yields have likely peaked and focus on the potential for rate cuts to start late this year as well as domestic issues (such as the looming election cycle) may be encouraging profit-taking.
We anticipate USD/MXN ending the year at 17.90.
USD/MXN – Q3-23 17.30 Q4-23 17.90 Q1-24 17.90 Q2-24 18.30
Source: FX STREET