Rabobank's latest analysis on the Mexican Peso (MXN) highlights that recent movements in the USD/MXN currency pair have been primarily driven by oil-related strength in the US Dollar and heavy speculative long-MXN positioning [1]. The bank maintains a baseline expectation for USD/MXN to trade mainly between 17 and 18, but notes that policy divergence, softer Mexican economic growth, or a carry trade unwind could push the pair above the 18 level [1].
Rabobank forecasts USD/MXN dipping to 16.8 in one month before stabilizing near 17.6, suggesting some near-term strength for the Peso followed by a return to the established range [1]. The analysis points out that current non-commercial positioning shows investors are heavily net long MXN, with net long positions at 87,782, though total positioning has been falling in recent weeks. A drop in net long positioning below 70,000 would indicate investors are moving away from the carry trade, which could weaken the Peso [1].
The report also discusses the potential impact of Banxico's policy decisions. While USD/MXN has been driven by oil-related USD strength recently, Rabobank notes that the risk of Banxico hiking rates could provide additional support for MXN. However, if Banxico diverges from the US Federal Reserve due to a softening Mexican economy, this could be destructive for MXN and push USD/MXN above the 18-handle [1].
Despite these risks, Rabobank is currently maintaining its outlook for USD/MXN to trade predominantly between 17 and 18, reflecting a cautious but stable view on the currency pair in the near term [1].
CONCLUSION
Rabobank sees the Mexican Peso trading in a stable range against the US Dollar but warns of downside risks if policy divergence or a carry unwind materializes. Investors should monitor positioning and Banxico's policy moves closely, as these factors could significantly impact USD/MXN. The outlook remains cautious, with potential for volatility if economic or policy conditions shift.