MexECON Blog

Peso Still on Upward Path

Over the last month, the currency markets have reflected sharp concerns about yawning budget deficits in Greece and a potential financial crisis in the euro zone. That has not only weakened the euro, but has put downward pressure on many emerging-market currencies. The Mexican peso has also come under some pressure. After hitting a recent high of $0.0791 (12.64 per dollar) on January 19, the peso fell 4.3% to $0.757 (13.21 per dollar) on February 8.

Despite this short-term move, however, the peso's trend still appears to be modestly upward. As of February 22, the peso has already erased more than half of its recent decline. Moreover, the peso has now exhibited almost an entire year of trend growth, i.e., generally higher highs and generally higher lows (see chart). Since the peso began its strengthening phase in earnest at the beginning of April last year, it has risen approximately 7.3%. Given that Mexican exports and industrial activity are now recovering better than expected, the peso's modest strengthening trend seems likely to continue. If the peso breaks above its January 19 high, the prospects for further increases would be even better.

Patrick Fearon, CFA
Vice President, Fund Management

Yahoo Financial Chart

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