Mexican Peso rallies to two-year high on US Treasury buyback
- USD/MXN drops to two-year low as US yields retreat.
- Treasury buyback weakens Dollar, pushing Peso through 17.00.
- Fed and Banxico minutes' drive next USD/MXN catalyst.
The Mexican Peso rallies to a two-year high of 16.94 as the US Dollar weakens amid falling US yields, which retreated after the US Treasury doubled the size of its long-duration bond buyback. The USD/MXN trades at 16.95, down 0.27%.
USD/MXN slides as lower US yields offset Iran uncertainty
Market mood has improved even though the odds for a quick resolution of the US-Iran conflict seem far from materializing in the short term.
Headlines in the Middle East show mixed stances of Tehran and Washington. For example, the
Iranian Deputy Parliament Speaker said that “We consider the Strait of Hormuz part of Iran and the Islamic Republic will continue to administer it.” At the same time, an Iranian official said that US President Trump's threats to bomb Iran are illogical and have no effect, referring to his statements as absurd, reported Al Mayadeen.
At around 18:00 GMT, the Federal Reserve is likely to release its final meeting minutes. The US economic docket for the remainder of the week includes Initial Jobless Claims, a speech by St. Louis Fed President Alberto Musalem, and the release of S&P Global Flash PMIs.
USD/MXN traders are eyeing the minutes of the Bank of Mexico (Banxico) from its last meeting on Thursday, followed by Retail Sales on Friday. Estimates suggest that sales are expected to increase 0.1% MoM in June, up from a contraction of 0.6% in May. For the twelve months to June, Retail Sales are forecast to rise from 1.6% to 3.1% due to the World Cup.
Besides this, the Peso is favored by the US decision to delay 50% tariffs on Canada, said Janneth Quiroz. Monex’s Director of Economic Analysis.
USD/MXN Price Forecast: Technical Outlook
In the weekly chart, USD/MXN trades at 16.9672, extending its slide beneath the longer-term simple moving averages, with the latest triple SMA reading clustered around 17.7337 as overhead supply. The pair remains capped by a sequence of descending resistance trend lines, with the more recent structure rejecting prices near 17.0058, reinforcing a bearish near-term bias. The Relative Strength Index (14) at 35.9 stays below the neutral 50 line, hinting at persistent downside pressure rather than oversold exhaustion.
On the topside, initial resistance is seen near the recent trend-line rejection around 17.0058, ahead of the broader triple simple moving average cluster at 17.7337. A stronger barrier emerges toward the earlier descending resistance line, where price last stalled around 17.9000, and only a sustained break above these levels would start to ease the prevailing bearish tone. With no clear structural supports defined in the current dataset, further weakness would leave USD/MXN probing for new demand zones below the recent 16.9672 close.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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