On Monday, Dec. 26, the peso made further progress against the dollar. The peso has been steadily increasing against the dollar since Dec. 16, which is seen as stable amid periods of economic uncertainty, Mexico News Daily reported.

At the close of business on Friday, Dec. 23, the exchange rate was 19.37 pesos to the dollar, and at bank windows, it was being exchanged for 19.84 pesos to the dollar. The peso was still rising as of midday on Monday.

The strength of the dollar against six other major currencies is gauged by the U.S. Dollar Index (DXY), which showed a decline of 0.08%. The Bloomberg Dollar Spot Index (BBDXY) showed a slight decrease of 0.15%.

The 10-year Mexican government bond rose by 2.8 basis points on Friday, reaching 8.91%.

One of the few that have gained ground against the dollar in 2022, the peso has outperformed other major currencies. The proximity of Mexico to the United States and its high-interest rates are two factors that JPMorgan Chase & Co. and Bank of America Corp. cite as reasons for their promotion of the Mexican peso as one of the most attractive currencies of Latin America. The central bank raised interest rates by 50 basis points on Dec. 15, to 10.5%.

According to Brendan Mckenna, currency strategist for Wells Fargo, the Mexican Peso at the current levels has value.

He said, “there is value in the Mexican peso at its current levels.”

“I also like the local political context in Mexico right now. There isn’t much political risk around the peso,” he added.

Even after a recent period of weakness, the peso has registered an increase of 4% in 2022. The Russian ruble, Argentine peso, and Brazilian real are the only global currencies that outperformed the Mexican peso, although they are all more volatile than the peso.

The Mexican currency has also had a strong performance in terms of carry trade, where investors borrow in dollars at a low rate to buy debt in pesos at a higher rate, with a return of more than 10%.

500 Mexican pesos notes on a table with traditional Mexican ornament.
500 Mexican pesos notes on a table with traditional Mexican ornament. Getty Images | Daniel Sambraus

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