Mexican Peso Gains Ground as Central Bank Shifts Gears

The Mexican peso strengthened for the second consecutive day against the US dollar on Friday. This upward trend follows Banco de México’s (Banxico) decision to cut interest rates.

The move sparked a positive reaction in the currency market, with the peso benefiting from a weaker greenback. As of Friday morning, the spot exchange rate stood at 20.1360 pesos per dollar.

This marks a significant improvement from Thursday’s official closing rate of 20.2984, as reported by Banxico. The peso gained 16.24 cents, equivalent to a 0.80% increase.

The dollar’s value fluctuated within a range of 20.3750 to 20.1223 units. Meanwhile, the Dollar Index (DXY), which measures the US currency against six major peers, dropped 0.31% to 108.07 points.

This decline in the dollar’s strength contributed to the peso’s gains. Banxico’s decision to lower its key interest rate by 25 basis points to 10% on Thursday played a crucial role in the peso‘s performance.

The central bank hinted at the possibility of larger cuts in future meetings, citing progress in controlling inflation. This forward-looking stance has allowed the local currency to regain ground.

Mexican Peso and Stock Market Trends

Market analysts at Monex attributed the peso’s continued advance to Banxico’s inflation expectations for 2025. They noted that this outlook aligns with the Federal Reserve‘s cautious approach, potentially leading to a less aggressive rate-cutting cycle.

In the United States, economic data revealed an increase in consumer spending last month. This report underscores the enduring strength of the US economy and has prompted the Federal Reserve to anticipate fewer interest rate cuts in 2025.

The Mexican Stock Exchange also showed signs of recovery on Friday morning. After four consecutive days of decline and reaching new yearly lows on Thursday, the market began to process Banxico‘s rate announcement.

The main index of the Mexican Stock Exchange (BMV) rose 0.63% to 49,564.40 points, while the FTSE BIVA index gained 0.73% to reach 1,007.45 units. Within the benchmark index, most stocks showed strong gains.

Notable performers included mining company Industrias Peñoles, up 3.92% to 287.05 pesos, followed by Regional with a 2.60% increase to 121.21 pesos, and Gentera, rising 2.58% to 24.66 pesos.