News & analysis

In a year that can be broadly characterised by higher rates for longer in developed economies and a sustained depreciation of emerging currencies as a consequence, the Mexican peso has stood out. High levels of real and nominal carry, together with growing investment flows and solid growth conditions, have led the peso to consistently outperform the major extended currencies, with the currency appreciating by more than 15% and a total return of 25% in the year to September. While the fundamental picture has not necessarily changed over the past month, conditions have still become more difficult for short USDMXN carry trades. The macroeconomic backdrop is likely to remain challenging and consequently keep USDMXN volatile, and we believe that the less constructive market environment will prevent the peso from retesting its year-to-date high in Q4. That being said, Mexico’s continued strong fundamentals and elevated policy rates environment lead us to believe that the recent sell-off now provides an attractive re-entry point for long MXN positions.

You can read the MXN Outlook in full here:

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Authors: 

Simon Harvey, Head of FX Analysis

María Marcos, FX Market Analyst

 

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