The Pros and Cons of Mexico's 'Super Peso'

The Mexican peso has become one of the world's best performing currencies this year, thanks to high interest rates, financial stability, and inflows of remittances and foreign investment. The currency has posted double-digit percentage gains against the dollar in 2023, reaching its strongest levels since 2016. The peso's strength is partly due to the high level of the Mexican benchmark interest rate, which is now 11.25 percent, and the "nearshoring" trend of US companies moving their production closer to home in Mexico instead of Asia. However, the strong currency reduces the earnings of exporters, while financial analysts expect a slight depreciation in the Mexican currency due to narrowing interest rate differentials.