Mexican peso falls to recent yearly low amid powerful US dollar

The Mexican Peso is losing ground while the USD/MXN rate is rising over 1.50% weekly to recent yearly highs.
The U.S. dollar index rises as Treasury yields rise, which increases the strength of the U.S. dollar.
Mexico’s economic data shows resilience, but US elections augment uncertainty for emerging market currencies.

On Friday, the Mexican peso depreciated sharply against the US dollar and recorded recent yearly highs of 20.29, above the previous high of 20.22 behind schedule in the North American session, bringing weekly losses of over 1.50% . A tight schedule on both sides of the Bravo River kept the mood in Mexico upbeat. On the other hand, US employment data were dismal and activity in the manufacturing sector declined. The USD/MXN rate is 20.26, up 1.20%.

Mexico’s timetable showed business confidence improving in October while the unemployment rate remained below the 3% threshold. S&P Global revealed that manufacturing activity continues to grow. Foreign exchange reserves rose, announced the Bank of Mexico (Banxico), which revealed its private survey showed that most economists expect the economy to grow by half of January’s estimate, at a rate of 1.4%.

In the US, the Bureau of Labor Statistics (BLS) released October nonfarm payrolls data that were worse than expected. The BLS mentioned that several hurricanes and union strikes could be blamed for the dismal report. Subsequently, the Institute for Supply Management (ISM) Manufacturing PMI fell to its lowest level since July 2023.

USD/MXN rose on the data, boosted by the US Dollar Index (DXY), which tracks the US currency against six other currencies. The index rose 0.41% to 104.31. The dollar was helped by a behind schedule rise in U.S. Treasury yields, with the 10-year T-bond yielding 4.38%, up ten basis points on the day.

In addition, the upcoming US presidential elections may put pressure on emerging market currencies. The tight race for the White House between former President Donald Trump and Vice President Kamala Harris is causing anxiety among investors who, according to Bloomberg, took long positions in US dollars ahead of the results.

Daily market update: Mexican peso under pressure ahead of US elections

Following the approval of controversial judicial reform, the USD/MXN rate is drifting towards political turmoil in Mexico. Eight of the eleven Supreme Court justices have announced their resignation in August 2025.
Meanwhile, in September, remittances in Mexico recorded their biggest decline in eleven years, down 4.6% compared to the same month a year ago, via the Bank of Mexico. Remittances reached $5.36 billion, lower than the $5.62 billion recorded in the same month last year.
Mexico’s business confidence improved from 52.1 to 52.3 in October. S&P Global revealed that the manufacturing PMI remained down over the same period despite improvement. The index increased from 47.30 to 48.4.
The U.S. Bureau of Labor Statistics (BLS) reported that October nonfarm payrolls were impacted by severe hurricanes and union strikes. The American economy created only 12,000 jobs. jobs, well below the estimated 113,000. Still, the unemployment rate held steady at 4.1% pending additional macroeconomic data.
The Institute for Supply Management (ISM) reported that manufacturing activity fell for the seventh consecutive month, reaching its lowest level since July 2023. The ISM manufacturing PMI fell from 47.2 to 46.5, missing forecasts of 47.6.
Chicago Board of Trade data from the December federal funds rate futures contract show that investors estimate the Fed’s easing of monetary policy by the end of the year will be 49 basis points.

USD/MXN Technical Outlook: Mexican Peso Falls as USD/MXN Hits 20.50

As mentioned in the previous report, the USD/MXN pair finally exploded higher, setting a recent yearly high. This paved the way for breaking the 20.50 level, followed by the September 28, 2022 high of 20.57 and the August 2, 2022 high of 20.82. Once crossed, the next stop will be March 8, 2022, the peak will be 21.46.

Conversely, if USD/MXN breaks below 20.00, the next support will be the October 24 intraday low of 19.74, followed by the 50-day plain moving average (SMA) of 19.62.