Mexican Peso stumbles to a seven-month low amidst resilient US Dollar, domestic economic strains


  • Mexican Peso is marking over 5% weekly losses as US Nonfarm Payrolls outperform analysts’ estimates.
  • Mexico’s encouraging data fails to lift the Peso’s amid government regulatory changes.
  • Rumors of Tesla’s Giga factory cancellation and airport tariff changes amplify investor apprehension in Mexico.

Mexican Peso (MXN) selling pressure continues, with the emerging market currency losing ground against the US Dollar (USD) early in the North American session. The USD/MXN pair climbed to a seven-month high of 18.48, shy of testing the psychological 18.50 price level. Solid economic data from the United States (US) underpins the USD/MXN, which is posting substantial gains of more than 5% in the week.

The US Bureau of Labor Statistics (BLS) revealed the Nonfarm Payrolls report for September, which crushed estimates as job creation was almost twice expectations, with figures coming at 336K vs. 170K forecasts by analysts. Further data showed the Participation Rate was unchanged, while the Unemployment Rate was aligned with August’s figures at 3.8%. Average Hourly Earnings growth, seen as an equivalent of inflation linked to wages, was 4.2% YoY, a tick lower than foreseen.

Daily Digest Market Movers: Mexican Peso weakens further; economists lift estimates for USD/MXN

  • US Nonfarm Payrolls for September came at 336K, exceeding forecasts of 170K, and crushed last month’s 227K (upwardly revised from 187K).
  • The Unemployment Rate in the US stood at 3.8% above estimates but flat compared with August, while the Participation Rate stood at 62.8%.
  • Average Hourly Earnings eased from 4.3% to 4.2% YoY.
  • Auto Exports in Mexico rose 16% YoY in September, above the prior month’s 15.7%.
  • Mexico’s September auto Production soared 24%, smashing August’s minuscule 2.8% growth.
  • According to Reuters, “Rohan Patel, Tesla’s senior public policy and business development executive, in a post on the platform X, formerly Twitter, rejected a Mexican media report saying Tesla had canceled its plans and thanked local, state and federal officials.”
  • The Mexican Stock Exchange continues to feel the effects of the government’s decision to change airport tariffs, while rumors of Tesla’s canceling its Giga factory plant spooked investors.
  • A Citi Banamex poll showed economists estimate headline inflation at 4.70% and core at 5.09% for the year’s end.
  • Analysts polled by Citi Banamex foresee the USD/MXN to end 2023 at 17.80, up from 17.60, and for 2024 at 18.86, up from 18.70 two weeks ago.
  • On Wednesday, the IMF raised Mexico’s growth projection in 2023 from 2.6% to 3.2% and from 1.5% foreseen in July to 2.1% for 2024.
  • Banxico’s September poll amongst economists reported that interest rates are expected to remain at 11.25% while inflation would dip to 4.66%.
  • The same poll shows the exchange rate is set to finish at around 17.64, down from 17.75.
  • Mexico’s S&P Global Manufacturing PMI for September came at 49.8, sliding to contractionary territory and below August’s 51.2, as the economy loses steam.
  • The Bank of Mexico (Banxico) held rates at 11.25% in September and revised its inflation projections from 3.5% to 3.87% for 2024, above the central bank’s 3% target (plus or minus 1%).
  • Banxico’s Government Board highlighted Mexico’s economic resilience and the strong labor market as the main drivers to keep inflation at the current interest rate level.

Technical Analysis: Mexican peso at the brisk of testing 18.50

The daily chart shows that the Mexican Peso is set to extend its losses. The USD/MXN pair has hit a new cycle high at 18.48, putting into play a challenge of the psychological 18.50 figure, which could extend towards the April 2018 yearly low of 18.60. With those levels cleared, the next stop would be the March 24 high at 18.79, followed by the psychological 19.00 figure.

Mexican Peso FAQs

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.