Peso power: Mexican currency nears six-year high vs. dollar

It’s good to be the peso.

The Mexican currency’s hot streak is about to take the official exchange rate through the 10-to-the-dollar threshold for the first time since 2002. American tourists, you’ve been warned.

Buttressed by rising interest rates and a surprisingly strong economy, the peso has been surging against the dollar in the last few weeks, continuing a run-up that began early in the year.

The official market rate -- meaning for large currency transactions at banks -- had the peso at 10.005 to the dollar this morning, down from 10.07 on Tuesday, according to Bloomberg data. Last August the dollar still was worth more than 11 pesos.

The last time the dollar bought fewer than 10 pesos was in October 2002.

For U.S. tourists the greenback already has crossed that line, because most bank exchange rates for smaller transactions are much less favorable than the official rate. Wells Fargo & Co.’s online currency center today was quoting 9.2 pesos per dollar.

It’s the trend that’s important here: The peso’s strength indicates that global investors like what they see in Mexico.

For one, the nation’s central bank raised its benchmark short-term interest rate from 7.5% to 7.75% on June 20 to combat rising inflation, and lifted it again last week, to 8%. That is helping to attract more money to Mexican money market accounts and to bonds.

What’s more, "The economy has held up pretty well despite the U.S. slowdown," says Win Thin, senior currency strategist at Brown Bros. Harriman & Co. in New York.

As for the Mexican stock market, it also is holding up relatively well. Despite diving 8% in June amid the global market sell-off, the country’s IPC stock index is off a modest 6.7% year to date, about half the drop in the U.S. Standard & Poor’s 500 index.

And for U.S. investors in Mexico, the robust peso means Mexican stocks are worth more when translated into dollars. Measured in greenbacks, the IPC index is up 1.8% this year.

Orale!

Photo: Not a bad idea anymore.  A sign at a Dallas pizza parlor in 2007, saying the store accepted pesos for payment. L.M. Otero/Associated Press

Comments

[Bad Planning]

Well, lets see if the peso hits the rate it was in 1991....If I remember correctly it was around 3 pesos for a dollar...Thank you home mortgages and greedy banks for screwing up the greenback.

[Jason]

How about that! The Mexican central bank is a step ahead of the US central bank. El Bundestbank -- or whatever they call it down there -- is doing more to protect the savings and investments of it's citizens while Bernanke has shown more interest in devaluing ours. With that said, if the Mexican economy is strongly levered to crude oil, this peso rally could soon be coming to an end. ....!Orale indeed!

[Dana]

Wonderful -
Possible names for the new combined monetary medium of exchange for North America aka - Canada, Mexico and US.
Amero - Canampes - Mexcamera - Amcanmexo - Camearica - Amexcando - Amcamex - Camexamico - mexcanam - canamerpeso - canamexso - loonybuck - wearesoscrewednow.

[Jason]

As the dollar falls vs the peso, the potential for the Amero gains more credence. The fiscal policy of the Fed can be described as no less than bumbling and stumbling. Incurring more debt to bail out the current debt with companies like Fannie and Freddie is complete idiocy. Not to mention, as a tax payer, why should my money be used to forgive and float these companies bad debt when, should I be in a similar situation, I will be not be shown the same courtesy?

[romantercero]

It wont last. Mexico is under heavy economic pressure. Mexico’s economy will soon follow the US. Mexico’s economy is inevitably linked to the US’s economy through oil exports, border maquila factories that produce for the US market and immigrants sending money back. The maquila sector has already felt the pinch of the slowdown. Sadly and in good probability the other sectors will soon follow.

[Brandon]

Wow! If things are going so well down there then why do people continue to flood here still (illegally of course). Ah, that's right.... third world country.

[Narc]

Common curency should be called mmmm

Dollar+Peso= DOPE

we should deal in DOPE... wait.... mmm think we already do...

[David]

This is part of the process of introducing the Amero and the North American Union. To facilitate the Amero conversion, the value of the Canadian dollar, the peso and the U.S. dollar must be similar. Anyone notice that the Canadian dollar is on par with the U.S. dollar? Five years ago this would be unthinkable. Visit SPP.gov.

[David Gold]

For those thinking a common currency is likely, you are making a big assumption. That Mexicans and Canadians would want to peg their currency to a debt laden nation. The Euro works because there are strict rules and penalties for nation's who are irresponsible with money. The German central banks made sure of that. Given the United States approach of unilateralism over the last decade it seems unlikely that the US would adhere to such rules. This leaves little incentive for the rising peso and Canadian dollar to merge with the recently struggling greenback. What remains to be seen is if this is a long term trend or if this problem starts to disappear around say November.

[AvangionQ]

"For U.S. tourists the greenback already has crossed that line, because most bank exchange rates are much less favorable than the official rate. Wells Fargo & Co.'s online currency center today was quoting 9.2 pesos per dollar." ... thanks to the devaluing of our currency through rampant uncontrolled printing of our deregulated fiat based `legal tender` dollar causing inflation, the U.S. Dollar of today is worth less than 3 cents in comparison to the 1913 dollar ... I blame this whole mess on the Federal Reserve Bank, and the disastrously shortsighted 1971 mistake following OPEC's decision to have all international petroleum sales be made in U.S. Dollars ... that the United States is importing two thirds of its oil in what can only be described as the largest transfer of wealth in all of history isn't helping matters ... our only solution, (aside from the letting the economy crash in a depression worse than the one in the 1930s which would invariably kickstart the revolution, and cause a regime change before restarting the economy with a different monetary note) - would be to abolish the Federal Reserve Bank, set the inflation rate to zero and ride out a manageable recession, while investing heavily in the infrastructure for alternative energies ... I see this as the only way out, if we're wise enough to take action now before the debt to our economy becomes insurmountable and the collapse inevitable ...

[Brian]

Ok David, I went to spp.gov like you asked. Since you obviously havent here is a quote:

Myth: The SPP is a movement to merge the United States, Mexico, and Canada into a North American Union and establish a common currency.

[Anthony]

I agree with AvangionQ in that we need to abolish the Federal Reserve. What sense does it make when your own government does not print the money and then pays interest on it. Second the Fed wants the dollar to drop so that they can create that Amero.

[Gabriel]

You know..I just hate the comments of people like Brandon, who act like they made the US a first world country.

Nobody gets a choosing in where they're going to be born. You didn't, yet you brag.

Anyways. I do hope the US economy recovers.

[Juan]

I agree with Gabriel, comments such as Brandon's are the stereotype of the frustrated, ignorant average American Joe who likes to pick on illegal immigrants as a cause of distress to their nation, and he's wrong too. It is estimated now that the majority of illegals crossing the border today are not Mexicans, but Central Americans, Asians, even coming from Middle Eastern nations.

Anyway, who cares, I just amuse myself watching the most egotistical of nations sinking down into a hole they just can't pull themselves out of anymore, while India, China, Brazil, and Europe's economies are prevailing.

[Jeff]

David Gold - you have it 100% corect I have thought this since a short time after 9/11. There is a masive conspiracy going on and the media is deceiving us.
America was planned to fail , IMO Just glad I got those Euro's @ 88 cents when they came out and have since double due to federal reserve, global mafia, all the evil people who really control things, and the Amero is real, Youtube "Amero" you will see Financial Analysts from Jeffrie's Investment Bank in London talking about the Amero and they cut him off QUICKLY!
Also London and now Dubai are the Financial Capitals of the World, Dubai is the new NYC.. London far more money management than Wall St. America is no longer the power house it was..
sad but true.

-Informed American Citizen

[PauPer]

got SILVER ? No matter what numbers are being printing on fiat paper, SILVER is money. Mexico Libertad Onza = US SIlver Eagle = Canadian Maple Leaf = Britannia = Austrian Philharmonic = Chinese Panda = Australian...

[ve kredi]

Dollar may loose more than todays position because there is a strong euro-petrol lobby building in eastern world.

[RAYMUNDO BARBOSA]

Bramdom....

Things are too farr away from beeing OK in Mexico (my country) and its not that the mexican peso is ganing power, is the us economy that is loosing the market (thanks to bush politics from my poin of view). So open your eyes, forget about inmigrants and if you play a roll to support your economy PLAY IT (it might be a good idea to stop having 80% of "made in china"products in your house from the dollar store.

BUY THE "MADE IN THE US".
made in china

[Moe]

I agree with most of you and it's nice to see that the peso is gaining strength and its due to a combination of reasons. One being Mexico's Calderon, a Harvard graduate, distancing himself from Bush and the US, mainly Bush. Mexico has backed the US for a long time but with all of the deportations and mistreatment of Mexicans, Mexico has distanced themselves more and more. Since Calderon came into power he has changed most immigration laws as well as made it easier for foreign investments, seeking help from Spain, Germany, Japan and even England and not to long ago even Italy in regard to the drug problem. Don't forget that the US receives 10 - 15% of its oil from Mexico that up until recently was sold extremely cheap to the US. The crude oil is refined here and sold back, when Mexico finally builds refineries, expect oil prices to go up.

[Michel Assam]

Hi, I´m a Mexican student from ITAM (School where Calderon made his Master and best business school in Latin America). I´ve been reading all of your comments and honestly I think some of you have a point and some others are totally mistaken.
First of all, Mexican economy will fall along the US economy, yes. But not in a high correlation. Mexican economy five years ago depended much more in the US economy than today. Things have changed a lot. Mexican economy is really steady, what´s happening is that it doesn´t grow due to the US fall. But it won´t strictly fall.
Mexican peso will keep on appreciating and for the ignorant Mexican how chose to post his ignorant comment is not only that the US dollar is falling ´cus it´s actually gained a lot in the last few days, but also is the strong Mexican peso paying off the foreign investors. If you´re gonna make an affirmation like that first take the time to compare the currency with other currencies. Mexican peso against the Sterlin 1GBP=21MNP (2 months ago)...Today 1GBP=18.95 MXN; 1EUR= 16.50MXN....Today 1EUR=14.90MXN it´s even appreciated against one of the fastest appreciating currencies in the world that´s the Brazilian Real.
Don´t write if you ignore. Be smarter.
Cheers.

[ROD HAMBLETON]

I feel the Mexican economy and contry in its self is showing it way for the future , and is not a country to look aside from . - The moves towards investment from abroad , as to industry and commercialization is on the fore-front , of advancement to become a player in the world .- T he time is ripe for Mexico to make the strides to be noticed as a lay back country , as son to be one of the largest auto manufacture in the world, let alone active in the food chain for the world .--- The Peso is stronger , and the faceoff to resistance of the USA interventions , with the new President Calderon , and his closeness with Canada , shows all that the Mexico can and will be in the future a noted country to deal with as to a strong Peso dollar , they have in trade to come .-- Mexico , welcomes investment from abroad, and bends over back wards to those investment and persons .-Further one should look seriously as setting up in living and investing in Mexico , as to retirment factually as it is affordable to live there and survive , where as home in the north , it will and is becoming next t0o impossible to do same , as the goverments eat more and more each day from our pockets .- I love Canada , but the government is eating us up , same i have heard from USA citizens,.- Mexico life style for investors and retirees with capital , can live very comfortable and enjoy thier life ,more fluently as we only wish to see .- the Peso with the new revolution of growth in investment sees much more positive ly a future for Mexico to come , -- Think everyone , look hard , Mexico is upcoming and not the old Mexico embedded in our minds as before .- think///rh