The Mexican Peso Short Term Volatility

For current Mexican peso exchange information Google “MXN Mexican Peso Chart.” Over the past few months there has been some volatility with the Mexican peso. In early July it was 11.50 to the US dollar. In September it fell to 14.15 to the dollar. Now it is regaining strength and Sept 30 was 13.856 to the US dollar.

It is essential to have a stable Mexican peso. Mexico is a major US trading partner. Does weakness in the peso reflect a projected weakness in the US economy? Our economies are mutually dependent.

When the Mexican peso falls it makes imports more expensive, especially critical is to cost of food for the masses. But it makes exports less expensive and it normally increases exports from Mexico.

What are the factors which cause the peso volatility? Is it instability in Europe which makes the US dollar stronger and in relative terms the peso weaker? Is there a lack of confidence in the Mexican economy?

Mexico has its debt under control which is a positive. The narco violence is having a negative impact on tourism income. September is a period of the new Mexican Budget, which creates uncertainty. The US dollar is stronger.

There is long term concern regarding Mexican oil production. Mexico is a crude oil exporter. But the oil production decline curve is falling substantially. If current trends continue, in a few years Mexico will change from an oil exporter to an oil importer. Mexico is not replacing its quality oil reserves. Also Mexico next year will have a Presidential election. There is no guarantee the current PAN political party will stay in power. So there is political uncertainty in the future of Mexico.

Mexico is diversifying away from the US dollar. The Mexican Central Bank has purchased over US $100 billion in gold. Will this change make a stronger or weaker peso?

In the short term it is impossible to predict whether the Mexican peso will get stronger or weaker. It is essential the Mexican peso and its economy be stable for both Mexico and the United States. Watch the Mexico peso. It is an indicator as to the direction of the Mexican economy.