2025.10.2313:52:50UTC+00Mexican Peso Remains Near 1-Year High

The Mexican peso appreciated to 18.40 per US dollar, reaching near its highest point in a year. This strengthening continues to attract investors interested in carry trades, despite indications of diminishing inflationary pressures and slowing economic growth. In the first half of October, consumer prices increased by 3.63% annually, slightly below the 3.71% anticipated by analysts. Additionally, Mexico's economic activity index showed a year-on-year decline of 0.9% in August, following a 1.1% drop in July, though this was less severe than predicted. The lack of significant surprises has led markets to anticipate a gradual path to monetary easing rather than any sudden liquidity shocks. Mexico still offers substantially higher real yields compared to many of its counterparts, even after recent interest rate cuts, sustaining carry trade flows and attracting foreign portfolio investments. Additionally, the potential resolution of US government funding concerns and optimism regarding a US-China trade agreement have lessened immediate external risk, reducing the likelihood of a sudden halt in external demand.