USD/MXN to test 16.60 again – Rabobank

Economists at Rabobank are not convinced that the recent rise in USD/MXN marks the start of a new trend of Peso weakness.

USD/MXN set to turn back lower when the pace of rising US yields slows

While we do think USD/MXN has likely traded the lows of this trend in the 16.60s, we don’t think this move higher is the juncture at which USD/MXN embarks on a bullish trend, and we see that despite us remaining in the USD bull camp. Instead, our view is that the recent bear steepening in the UST curve will likely enter a consolidation period. 

When the pace of rising US yields slows, a decline in volatility will feed through into USD/MXN and result in a return of those carry traders back into long MXN positions that will cause USD/MXN to test 16.60 again.