Peso Rallies to Strongest Level Since May 2024 Amid Carry-Trade Flows

Mexico's peso has made a remarkable comeback, reaching its strongest level since May 2024 and trading around 16.89 per US dollar.

This unexpected strength has left Mexico's central bank and Wall Street forecasters off guard, as the currency has surged nearly 20% against the dollar since January 2025.

The peso's revival is attributed to several factors, including a softer US dollar and higher interest rates in Mexico compared to the US Federal Reserve.

Carry-trade flows have also contributed to the rally, with investors drawn to Mexico's relatively high interest rates of around 7% at the central bank's benchmark rate.

However, the peso's strength is creating a squeeze for Mexican exporters, who are exposed to the dual challenge of a stronger home currency and a single-market dependency on the US.