Mexico's Super Peso: Strengths and Weaknesses
The Mexican peso has been gaining strength against the US dollar in recent weeks, with some analysts calling it the 'super peso.' At its strongest point in 28 months, the spot exchange rate hit a new yearly low of 16.863 pesos to the US dollar on Friday.
According to Graham Stock, an analyst at RBC BlueBay Asset Management, the peso's strength is not due to exceptional performance compared to other emerging market currencies, but rather due to the weakness of the US dollar in previous cycles.
Alejo Czerwonko, emerging markets analyst at UBS Global Wealth Management, attributes the peso's gain against other major currencies to domestic factors such as lower trade-risk premiums and political stability.
However, some analysts warn that the strong peso may have negative effects on certain sectors of the Mexican economy. The agricultural export sector is expected to face a less favorable outlook due to its high costs which are not linked to imported inputs.