Mexican Peso Surges to Near 5-Month High Against Dollar Amid Fed Rate pause

Mexico city, Mexico – August 6, 2025 – The Mexican peso experienced significant gains against the U.S. dollar today, reaching a level not seen in nearly five months, following the Federal Reserve’s decision to hold interest rates steady. The exchange rate closed at 18.61 pesos per dollar, a 0.66 percent increase, representing a 12-cent improvement from Tuesday, August 5th, and a 29-cent gain compared to Monday, August 4th.

federal Reserve Holds Rates Steady Despite Trump Pressure

The Federal Reserve resisted pressure from former President Donald Trump to raise interest rates, opting to maintain the federal funds rate in the 4.25-4.50 percent range. This decision contributed to a weakening of the dollar in the short term.Market analysts at Banco Santander noted that the fed’s stance signals a potential shift in monetary policy, acknowledging growing concerns about a slowing U.S. economy.

Neel kashkari, president and CEO of the Federal Reserve bank of Minneapolis, indicated in a CNBC interview that an adjustment to the federal funds rate might potentially be appropriate in the near future, citing economic deceleration.Kashkari specifically mentioned that the Fed is closely monitoring employment data and inflation trends to determine the timing of any potential rate cuts. He also highlighted the importance of maintaining price stability while supporting full employment.

Peso’s Performance and Key Levels

The peso’s strongest performance this year was recorded at the end of July, reaching 18.53 pesos per dollar. Today’s closing rate of 18.61 pesos remains close to this high-water mark. The appreciation of the peso is also attributed to strong Mexican economic fundamentals, including a stable inflation rate of 4.68% in July (according to data released by the National Institute of Statistics and Geography – INEGI) and a positive trade balance.

dollar Prices at Mexican Banks – August 6

As of Wednesday, August 6th, Banamex Bank is selling dollars at 19.07 pesos and purchasing them at 18.03 pesos. Other major Mexican banks, including BBVA and Citibanamex, are offering similar rates, with slight variations depending on the transaction type (cash vs. electronic transfer). A survey of 10 major banks showed an average selling price of 18.95 pesos per dollar.

The dollar index (DXY), which tracks the dollar’s strength against six major currencies, fell 0.55 percent to 98.23 points. Bloomberg’s dollar index (BBDXY) also declined, dropping 0.42 percent to 1,204.60 units.

Yields on the 10-year U.S. Treasury bond currently stand at 4.22 percent, while the 10-year Mexican government bond yield remains at 9.14 percent. This yield differential continues to attract foreign investment into Mexican debt.

Emerging Market Currency Gains

The peso was not alone in its gains against the dollar. Several other emerging market currencies also strengthened today, including the Colombian peso (up 1.08 percent), the Polish zloty (up 0.92 percent), the South African rand (up 0.84 percent), the Czech koruna (up 0.83 percent),and the Brazilian real (up 0.77 percent).Analysts attribute this broad-based strength to increased risk appetite among investors following the Fed’s decision and positive economic data releases from several emerging economies.