The real exchange rate of the Mexican peso reached its highest level since 2014, reflecting the strength of the currency despite the economic recession of recent years. The real exchange rate of the Mexican peso reached its highest level since 2014. Considering the country’s disastrous economic performance in recent years, it is surprising that the currency has outperformed its regional peers.
According to analysts, investors are questioning whether the euro can maintain its superiority.
The Mexican Peso Is The Star Among The Region’s Currencies
In recent months, the Chilean peso has outperformed, but the Brazilian real has also attracted a lot of interest. However, the monthly volatility of the Chilean peso, Brazilian real and Colombian peso is 19, while that of the Mexican peso is only 11.5.
Two factors have contributed to the peso’s success: first, currency trading, and second, the four-year government of Andrés Manuel López Obrador, which was stable and at the same time very peaceful.
A third factor is the enormous growth in remittances, which continue to reach new records. While recent economic growth does not appear to have played a significant role in the performance of the Mexican peso, a slowdown in the U.S. this year could plunge Mexico into recession and reduce remittances.
Confident Outlook For 2024
Although the government of Andres Manuel Lopez Obrador (AMLO) has pursued conservative fiscal policies, the central bank, known for its risk aversion, has not suddenly become “dovish” and remains largely unaffected by political pressures. AMLO has emphasized in the past that he wants low interest rates but respects the independence of the central bank. The Mexican peso is also a great hope for 2024.
In December, the mandate of Gerardo Esquivel, a well-known moderate, expired. The central bank surprised markets and experts by raising interest rates by 0.5 percentage points earlier this month.
More Surprises To Come
This makes the Mexican peso an excellent low-risk option. With the exception of the Argentine peso, which is not traded and where the central bank intervenes, the peso’s Sharpe carry ratio (return relative to risk taken) against the dollar was the highest of all major currencies last year.
Short positions in the Mexican peso against the Japanese yen yielded a 42% return last year. Only two unattractive investment opportunities, the Argentine peso and the Russian ruble, exceeded this ratio.
*The real exchange rate of the Mexican peso reached its highest level ever, showing the currency’s resilience despite the recent economic slowdown. The real exchange rate of the Mexican peso reached its highest level since 2014.
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