Market Analysis by Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS
March 20, 2025 –
“The Mexican peso has demonstrated remarkable appreciation in 2025, advancing more than 3.5% against the U.S. dollar. Despite episodes of volatility, such as the one recorded on March 19—when the currency reached the $20.08 per dollar zone due to expectations regarding the Federal Reserve’s monetary policy—the peso remains resilient in the face of global economic challenges. This has led investors to consider the peso as one of the best-performing emerging market currencies of the year.
One of the factors contributing to the peso’s stability is the strategic stance of the Mexican government regarding the tariff policies imposed by Donald Trump’s administration. President Claudia Sheinbaum has opted for a prudent approach, securing trade agreements that minimize the impact of protectionist measures. In this regard, the agreement with the United States to exempt goods complying with the USMCA from 25% tariffs until April 2 has provided relief to Mexican exports, representing a crucial part of the national economy. These negotiations have been key to maintaining the country’s competitiveness in the international market.
Additionally, interest rate expectations have influenced the peso’s performance. While Mexico’s benchmark interest rates are expected to follow the trend of U.S. yields, the country’s macroeconomic strength and investor confidence have allowed the currency to remain relatively strong. However, analysts warn that a potential correction in equity markets could put downward pressure on the currency. The Bank of Mexico may adjust its monetary policy to prevent excessive exchange rate fluctuations.
Despite the peso’s resilience, global economic uncertainty remains a key factor in its performance. The uncertainty generated by a lack of clarity in fiscal, trade, and geopolitical policies has reached levels comparable to those seen at the start of the pandemic. This situation keeps investors cautious, which could translate into episodes of volatility in the foreign exchange market. Nevertheless, Mexico’s internal macroeconomic stability has helped mitigate some of these adverse effects on the currency.
Another aspect that has favored the peso’s appreciation is the strength of remittances and foreign direct investment. Mexico continues to be an attractive investment destination due to its proximity to the United States and its key role in manufacturing and exports. The steady flow of remittances has also strengthened domestic demand and contributed to exchange rate stability. The growth of nearshoring has also played a fundamental role in attracting foreign capital.
In conclusion, while the Mexican peso has managed to maintain an appreciation trend in 2025, its stability will largely depend on external factors. The Federal Reserve’s monetary policy, trade relations with the United States, and global market dynamics will remain key in its performance. However, the Mexican government’s prudence and the national economy’s resilience continue to support the currency’s strength against international challenges. Investors should closely monitor these indicators to make strategic decisions in the foreign exchange market.”
Analysis by Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS