Mexican Peso Likely To Trade Sideways In Near Term Before Longer-Term Depreciation

  • Fitch Solutions holds a neutral view on the Mexican peso (MXN) over the near term, as its real interest rate differential with the US and Mexico’s political stability relative to its peers will be balanced by slowing economic growth and risks around financial market sentiment. 
  • Over the longer term, it is expected that the currency will modestly depreciate, weighed down by relatively weak economic fundamentals such as low investment. Risks are weighted to the downside. 
  • Fitch forecasts the unit will stand at MXN20.10/USD at the end of 2021, slightly weaker than its previous forecast of MXN19.80/USD to account for the unit’s recent performance. This will put more pressure on highly leveraged companies such as PEMEX, which have a majority of their debt denominated in USD.

(Source: Fitch Solutions & NCBCM Research)