Mexican Peso Falls Sharply in Value Against US Dollar

Mexico Dollars
AP Photo/Eduardo Verdugo

Over the past year the Mexican peso has been falling. A year ago the peso stood at 12.94 to the US dollar; six months ago, 14.75; one month ago, 15.49; and on June 30th 15.73.

An stable Mexico, politically and economically, obviously benefits the United States and Texas.

Dr. Tony Payan, director of the Mexican Center at the Baker Institute, notes that currencies rise and fall on supply and demand. Although several factors put pressure on the peso, many of which have to do with the oil markets, inflation, etc., the price of the peso is largely subject to capital inflows and outflows. A peso devaluation likely means that capital currently leaves Mexico.

Daniel Zavala notes the following reasons for the peso fall: global rise of the U.S. dollar; the Banco de Mexico has not raised interest rates as it is satisfied with the current level of inflation; Mexico’s growth rate is too low because the government has not spent on infrastructure programs; and the current low price of oil is not favorable.

On July 1, 2015, analysts at Societe Generale opined that the peso can go lower and have revised their target to 17 pesos to the dollar.