Mexican Peso Hits Strongest Level Against Dollar in Six Months

The Mexican peso reached its strongest level against the US dollar in six months after the central bank left interest rates unchanged at its August monetary policy meeting.

The peso gained 0.12% against the dollar on Thursday, extending its rally to 10 straight days, and closed at 17.21 to the US dollar. It dipped below 17.14 in early trading on Friday, a further gain of 0.58%, marking its strongest level since February 23.

The central bank's decision to hold interest rates steady at 6.50% was seen as a vote of confidence in Mexico's economy, with analysts attributing the peso's appreciation to the carry-trade strategy. This involves investors borrowing money in low-interest-rate currencies, such as the US dollar and Japanese yen, and investing it in higher-yielding assets or currencies like the Mexican peso.

Gabriela Siller, director of analysis at Grupo Financerio BASE, said the peso's appreciation is due to this carry-trade strategy, which benefits from Mexico's wide interest rate differential compared to other major economies. The central bank's statement hinted that rates would remain steady for the foreseeable future.