The Dollar Price Dropped Again In Mexico

The value of the Mexican peso against the US dollar fluctuates due to various economic, political, and global factors. As of the last week of June 2024, the dollar price in Mexico is $17.91 Mexican pesos. These fluctuations are common in currencies and reflect market dynamics and investors' perceptions of the stability and performance of the Mexican economy compared to that of the United States. It is important to note that after the elections, where Dr. Claudia Sheinbaum emerged victorious, the dollar price in Mexico increased. Now that the news is a solid fact and accepted by the Business Coordinating Council, everything is returning to normal.

One of the main factors influencing the value of the peso is the monetary policy of Mexico and the United States. Decisions by the Bank of Mexico regarding interest rates can affect investors' perceptions of the profitability of investing in peso-denominated assets. If the Bank of Mexico raises interest rates, it can attract foreign investments, increasing the demand for pesos and, therefore, its value. On the other hand, if the US Federal Reserve increases its rates, it can strengthen the dollar and cause investors to sell pesos to buy dollars.

International trade also plays a crucial role. Mexico is an open economy with a strong dependence on trade with the United States. Trade balances and bilateral trade policies directly affect the demand for pesos and dollars. A trade surplus, where exports exceed imports, can strengthen the peso, while a deficit can weaken it. Another important factor is the political and economic stability of Mexico. Political events such as elections, changes in government, or significant economic policies can influence investor confidence. A perception of instability or risk can lead to a massive sell-off of pesos, depreciating its value. Conversely, an administration perceived as stable and business-friendly can attract investments, strengthening the peso.

Inflation expectations also affect the value of the peso. If investors anticipate high inflation in Mexico, they may prefer to invest in dollars or other more stable currencies, which weakens the peso. The Bank of Mexico, through its monetary policy, attempts to control inflation to maintain peso stability. Oil prices are another determining factor, as Mexico is a major oil exporter. Oil revenues represent a significant part of the country's foreign exchange reserves. When oil prices are high, dollar inflows increase, which can strengthen the peso. Conversely, when oil prices drop, foreign exchange reserves decrease, and the peso can depreciate.

The flow of international capital also influences the strength of the peso. In times of global uncertainty, investors tend to seek refuge in safe currencies like the dollar, which can lead to a depreciation of the peso. Conversely, in times of global economic stability, investors may seek higher returns in emerging markets like Mexico, strengthening the peso. The perception of global risk and international economic events, such as financial crises, pandemics, or changes in the economic policies of major powers, can have an immediate impact on the value of the peso. The Mexican economy, being integrated into the global economy, is susceptible to these external shocks.

Finally, remittances sent by Mexicans abroad are an important source of foreign exchange. When remittances increase, the inflow of dollars into the country rises, which can strengthen the peso. Conversely, a decrease in remittances can reduce the supply of dollars, depreciating the peso. The value of the Mexican peso against the US dollar is influenced by a complex interaction of internal and external factors. Monetary policy, international trade, political and economic stability, inflation expectations, oil prices, capital flows, international events, and remittances all play crucial roles in determining the strength or weakness of the peso. Understanding these factors can help explain the daily fluctuations in the foreign exchange market. The news of the rise and fall of the dollar price means gains or losses for the diverse workers in Puerto Vallarta, as it is a tourist city where most tourists come from the USA, making the handling of dollars very common.