Mexican Peso Rebounds but Carry Trade Exodus Bites Amid Narrowing Interest Rate Differentials

The Mexican Peso (MXN) gained some ground against the US Dollar (USD) on Friday, rising 0.5% but still set to end the week with a 3% loss as investors continue to exit the 'carry trade' amid narrowing interest rate differentials.

The USD/MXN pair dropped to 18.21 after peaking at 18.35, and experts expect it to remain in an uptrend due to the decreasing interest rate gap between the US and Mexico.

According to a recent Banxico private economists' survey, most respondents believe that interest rates will stay at 6.5% until the end of 2027, while the Federal Reserve (Fed) is expected to raise rates by at least 25 basis points later this year.