Mexico's peso falters, but attractive local bond yields offer support
EWW•The peso erased its 2026 gains and traded above 18 per dollar after reaching 16.8520 in early September. Analysts said attractive local bond yields may support it, with the 10-year yield at 9.59%.
1. Peso reverses gains
Mexico's peso erased all its 2026 gains in recent weeks after strengthening 6% in the first eight months of the year. It traded above 18 per dollar on Tuesday, after reaching 16.8520 in early September, its strongest level in more than two years.
2. Yields may offer support
Analysts said the reversal likely reflects profit-taking rather than sustained capital flight, and that the peso could weaken to 18.5 per dollar while finding support from domestic bond yields. Mexico's 10-year government bond yield was 9.59%, compared with 5.27% for the equivalent U.S. Treasury and 3.09% for Japanese government bonds. The Federal Reserve's rate hike, followed by Mexico's central bank holding its key rate, narrowed the interest-rate gap and dampened demand for pesos.
