The exchange rate breached the 18 pesos per dollar ceiling after rising global oil prices threatened to erase months of gains for the Mexican peso.
As of 7:08 PM on Sunday, March 8, the price of the dollar is 18.0017 pesos, according to Bloomberg, a depreciation of more than 20 centavos from the closing rate of 17.80 pesos per dollar recorded on Friday, March 6.
It is the first time the dollar has exceeded 18 pesos since December 31 of last year, when it closed at 18.0012 units per dollar. However, it briefly fell back into the 17.98 to 17.99 range shortly thereafter.
Gabriela Siller, director of economic analysis at Grupo Financiero BASE, suggested that rising energy prices could have a direct impact on inflation in both Mexico and the United States.
The analyst explained that the Mexican peso is one of the most depreciated currencies in the world on Sunday, surpassed only by the currencies of Hungary, Poland, and South Africa.
This could lead both the Bank of Mexico (Banxico) and the U.S. Federal Reserve to refrain from cutting interest rates.
Since March 6, and with the increase in oil prices driven by the conflict in the Middle East, Siller noted that “the increase in the international price of gasoline will affect the public finances and/or consumers of Mexico,” either through a stimulus to the Special Tax on Production and Services (IEPS) or a reduction in prices by Petróleos Mexicanos (Pemex) to wholesalers.
Why did the price of the dollar rise this Sunday?
The dollar strengthened on Monday (Asia local time) against all major currencies as the deepening conflict in the Middle East pushed oil prices above $100 per barrel and boosted demand for safe-haven assets. The peso’s decline reflects broader market sensitivity to geopolitical risk and its impact on commodity prices.
Demand for the U.S. Dollar surged amid expectations of further production cuts in crude oil markets and the threat of the United States escalating the conflict with Iran, weakening risk perception. Meanwhile, Iran appointed a new supreme leader and its armed forces suggested they had the capacity for sustained, high-intensity warfare.
The Bloomberg Dollar Spot Index rose 0.5 percent, extending the 1.3 percent gain from last week. The Swedish krona, the euro, and the Danish krone led the losses, while the South African rand and the Mexican peso were the worst-performing currencies among emerging markets.
“The dollar has been considered the safe haven par excellence due to its liquidity, as well as being boosted by rising oil prices,” said Matthew Ryan, head of market strategy at financial services firm Ebury. “We support the continuation of the dollar’s rise as long as the war continues without an immediate complete in sight.”
The increase in oil prices has fueled inflation fears at the Federal Reserve and other central banks, leading traders to reduce their bets on interest rate cuts that had weighed on the U.S. Currency. The dollar also benefits from the United States’ position as the world’s largest oil producer.
The dollar has been one of the few traditional safe havens that have offered refuge to investors as the conflict in the Gulf region rattled markets. Treasury bonds, the yen, the Swiss franc, and gold have come under pressure, while the dollar has recovered.
With information from Bloomberg.
