Business · Markets · 7 hrs ago
Mexican peso falls as expected rate gap with the US narrows
The Mexican peso fell to 18.41 per US dollar on Friday, its weakest level in 10 months, and has lost value for five straight weeks.
Investors have been less interested in a strategy called carry trade, which involves borrowing in a low-interest-rate currency and investing in one with higher rates.
Mexico's central bank has signaled that it may cut interest rates, while markets expect the US Federal Reserve could raise them.
That would narrow the gap between the countries' rates, which is currently 2.5 percentage points, and make the peso less attractive for carry trades.
The peso has lost about 9 percent over five weeks.
One analyst expects it to trade between 18.30 and 18.55 per dollar this week, but warned that trade or diplomatic tensions could push it lower.
The Mexican peso fell to its weakest level in 10 months as expectations of a narrower interest-rate gap with the United States reduced its appeal for carry trades.
The exchange rate closed Friday at 18.41 pesos per dollar, its highest level since November 24 of the previous year.
The peso lost 1.4% over the week and 9% over five weeks, according to the report.
Expectations of a Banxico rate cut contrast with expectations of a US Federal Reserve rate increase.
- Who
- The Mexican peso and the Bank of Mexico (Banxico).
- What
- The peso weakened against the US dollar as expectations of a narrower rate gap weighed on its carry-trade appeal.
- When
- The report was published on October 12, 2026; the peso’s reported closing rate was for Friday.
- Where
- Mexico’s currency market, against the US dollar.
- Why
- Expectations of a Banxico rate cut and possible Federal Reserve rate increases could narrow the interest-rate gap.
This story does not have two clearly opposing sides.
This is consistent with the unwinding of carry-trade positions and with the depreciation of the peso.
The minutes of Banxico showed a bias in favor of cutting the interest rate at least once.
Speculative positions betting on peso appreciation fell by 79.58% over the week, according to Gabriela Siller.
Banxico reported that the peso closed at 18.41 per dollar, its highest level since November 24 of the previous year.
El Financiero published its report on the peso’s losses and the expected narrowing of the rate gap.
- Friday closing rate
- 18.41 pesos per US dollar
- Weekly peso loss
- 1.4%
- Five-week peso loss
- 9%
- Banxico policy rate
- 6.5%
- Federal Reserve policy rate
- 4.0%
- Interest-rate gap
- 250 basis points
Sources
Related news
Mexico cuts its 2026 growth forecast to 1.5%
Violence drives up car insurance costs in Sinaloa
WTTC warns proposed Mexico visitor fee increase could hurt tourism
Mexico pays higher rates to borrow as fiscal concerns and US yields rise
Banks expect the Mexican peso to weaken further by the end of 2026
Rising US Treasury yields could make borrowing costlier for Mexico
Yucatán reports 11.566 billion pesos in tourism investment
Long-term debt issuance on Mexico’s stock exchange reaches 234.979 billion pesos
Weaker peso may add pressure to inflation in Mexico
Orbia leads Mexican stock gains while Grupo BMV falls most
SpaceX agrees to buy spectrum to expand Starlink mobile service
