The Mexican peso declined to 18.3987 per dollar on Friday, marking five weeks of losses and reaching its weakest level since November 2025. The currency weakened due to minutes from Banco de México that signaled a potential narrowing of the interest rate differential with the United States.
The Bottom Line
- The peso depreciated 1.2 percent on Friday, closing the week down 1.4 percent and recording five weeks of declines.
- Speculative long positions on the currency in Chicago dropped to their lowest level since January of last year.
- Meanwhile, Mexico’s benchmark stock index rose 1.63 percent to 66,048.57 points, supported by gains in Grupo México and Pinfra.
Interest Rate Expectations Fuel Currency Pressures
The currency’s descent deepened after the central bank released minutes from its latest policy meeting. Three of the five members of Banco de México’s governing board indicated a willingness to consider cutting the benchmark interest rate if inflation trends remain favorable. This shift raised market expectations of a reduced yield gap compared to the United States. A smaller yield gap diminishes the profitability of carry trade strategies, which have historically driven capital inflows into Mexican assets and supported the local currency.
During Friday’s trading session, the peso touched an intraday low of 18.4990 per dollar before paring losses to settle at 18.3987 units. Over the course of the week, the currency fell 1.4 percent. Felipe Mendoza, an analyst at EBC Financial Group, noted that the exchange rate is expected to experience ongoing volatility and technical consolidation within a range of 18.30 to 18.55 pesos per dollar.
Chicago Futures and Market Positioning
The downward pressure on the currency is reflected in offshore derivatives markets. Speculative positions favoring the Mexican peso in the Chicago futures market experienced their steepest weekly drop since the post-election volatility of June 2024. These holdings fell to their lowest level since January of last year.
Following the release of the central bank’s minutes, the peso registered the worst performance among a basket of global currencies monitored by Reuters. The divergence widened after the U.S. Federal Reserve raised interest rates in mid-September and signaled further tightening. In contrast, Banco de México held its policy rate steady and maintained that its decisions would not automatically mirror those of the Fed.
Divergence in Local Equities and Debt Markets
While the currency faced sustained selling pressure, domestic equities moved in the opposite direction. The benchmark stock index advanced 1.63 percent to reach 66,048.57 points, securing a weekly return of 2.35 percent. Grupo México led the session’s gains with a 5.26 percent increase to 242.48 pesos, followed by Pinfra, which climbed 3.92 percent to 284.78 pesos.
| Market Indicator | Latest Reading | Period Change |
|---|---|---|
| USD/MXN Exchange Rate | 18.3987 | -1.2% (Daily) |
| S&P/BMV IPC Index | 66,048.57 pts | +1.63% (Daily) |
| 10-Year Government Bond Yield | 9.30% | -2 bps |
| 20-Year Government Bond Yield | 9.75% | Unchanged |
In the secondary debt market, the yield on the 10-year government bond declined by two basis points to 9.30 percent. The 20-year bond rate remained unchanged from its previous close at 9.75 percent. Meanwhile, market participants continue to monitor external variables, including geopolitical risks in the Middle East, the upcoming U.S. midterm elections, and the ongoing review of the United States-Mexico-Canada Agreement (TMEC).
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
