The Mexican peso hits its strongest level against the dollar in 6 months

Mexico's peso reached its strongest level against the U.S. dollar in six months on Thursday, continuing a 10-day rally after the central bank kept interest rates steady at its August 6 monetary policy meeting. The peso closed at 17.21 to the U.S. dollar and dipped to 17.14 early Friday, a 0.58% gain, its highest since February 23.

Forbes Mexico attributed the early rise to a negative U.S. jobs report, predicting the peso could gain 1.3% by week's end. The central bank's unanimous decision to maintain its benchmark rate at 6.50% for a second consecutive meeting, coupled with hints of sustained rates, bolstered the peso. Inflation slowed in July, the fourth month in a row, but the bank expects it to fall to its 3% target by late next year.

Analyst Gabriela Siller of Grupo Financerio BASE noted the peso's appreciation is also due to the "carry-trade," where investors borrow low-interest-rate money and invest in higher-yielding assets or currencies. Experts attribute the peso's strength to a favorable interest rate differential between Mexico's 6.50% rate and the U.S. Federal Reserve's 3.50%-3.75% target range.

U.S. job data, showing a 23,000 drop in nonfarm payrolls following a revised increase, likely prompted the market to lower expectations of U.S. rate hikes, further boosting the peso. Monex Grupo Financiero echoed this, attributing the peso's rise to the dollar's weakness and a shift in expectations about the Federal Reserve's monetary policy at its September meeting.