US Dollar Mexican Peso
Dollar to Peso exchange rate
Most traders trade the major currency pairs and do not pay attention to such an interesting instrument as the MXN — Mexican peso. The dynamics of this currency is trending, which is great for position trading. For working with the peso, just as with USD KRW, you can use the classic technical analysis and Price Action.
- The peso is the national currency of the Republic of Mexico.
- One peso consists of 100 centavos.
- In May 2008, the Mexican peso joined the list of freely convertible currencies.
- For a currency symbol the same as the U.S. dollar is used — $. Bills in denominations from 20 to 1000 pesos are in circulation.
- Until the mid-19th century, Spanish gold and silver coins were used as tender in Latin America.
- The peso appeared in 1863 because of the change to the decimal system, based on the coinage of 8 reals. One peso became worth 100 centavos.
The Mexican currency experienced inflation several times, the largest being in the 1980s. The government had to conduct a monetary reform so that it was possible to exchange the new Mexican peso at a rate of 1:1000.
Analytics and influence factors, what dollar to peso exchange rate depends on
Dolar Peso exchange rate is, above all, dependent on the state of the national economy and monetary policy of the Central Bank.
Mexican economy and its impact on the Dollar to Peso exchange rate
The structure of the Mexican economy is much like Russia’s. The oil and gas industry is the basis of the welfare of the country.
Mexico is the 3rd largest oil producer in the western hemisphere and the 7th largest in the world. However, experts predict a decline in production soon, which will lead to the need to find new sources of income.
- The mining industry has a special place in the Mexican economy.
- Mexico is among the top ten countries with reserves of gold, silver, copper, zinc, and molybdenum. The republic is the world’s leading producer of precious metals. It is home to the largest gold and silver mines, Peñasquito and Metates.
- Mexico is a major producer of agricultural products.
- The country exports coffee, tobacco, cotton, fruits, corn, wheat and soybeans.
- Its main trading partners are the USA, Canada, the European Union, and Latin American countries.
- Famous resorts are located on the territory of Mexico, and the tourism industry is a significant source of income for the state budget.
The global economic trend indicates that the overall economy has begun to recover from the COVID-19 pandemic. However, despite this, economic risks such as inflation, foreign policy uncertainty and geopolitical conflicts remain high.
As for interest rates, they could affect Mexico’s economy, as high interest rates could slow economic growth and increase borrowing costs. At the same time, low interest rates can stimulate economic growth and increase the availability of credit.
In March 2023, interest rates in Mexico were 11.25 percent, which is high. However, the Bank of Mexico warns that there could be changes in interest rates soon depending on economic conditions.
Currency pair features
The Mexican peso is the third most traded currency in the western hemisphere after the U.S. and Canadian dollars.
Swaps and spreads
Since the USD to MXN pair is not one of the major currency pairs, the spreads here can be large. Average spreads at some international forex brokers during the U.S. trading session:
- FXCM — 30.9;
- DF Markets — 83.5;
- FxPro — 88.2;
- OANDA — 55.6.
Pips are relatively cheap, so swaps do not significantly affect the balance of trade.
Calculation of 1 Dollar to Peso pips
Before opening a trade, you should go to your broker’s website and calculate the pip value, spread, swap, and potential profit with a calculator.
By specifying a currency pair, leverage, transaction direction, and opening and closing prices, the trader will receive a table with the following data:
- calculated prices;
- point value;
- margin requirements;
Volatility of USD to Pesos
Dollar to Mexican Peso is especially active during the U.S. session. Quotes rise to their peak values at 15-16 hours: up to 67 points. Within the week, the most volatile day is Monday, when the swing reaches 40.5 pips. The interest in the currency pair during the week stays almost on the same level. Dynamics of the quotes’ changes slightly decreases in the middle of the week, while the least volatile day is Friday (37.3 points).
The dollar-peso pair correlates best with the oil chart. When oil prices go up, the U.S. dollar/peso ratio goes down, and vice versa.
One can also trace the dependence of Dollar vs Peso on the prices of precious and industrial metals, natural gas, and agricultural products. These correlations reflect the export orientation of the Mexican economy.
- The Mexican peso dynamics effectively correlate with the movement of other commodity currencies: the Canadian dollar, the Russian ruble, the Norwegian krone, and the Australian dollar.
- Interesting correlations are revealed when comparing peso charts with stock indices.
- The USD/MXN Dolar Mexico has an inverse correlation with the main British index, the FTSE 100.
Large gaps in the dollar-peso pair are rare. Trade them to the close is not recommended because of the high risk. The gap may not close in the case of turbulent events in foreign markets (for example, in the case of a sharp drop in oil prices).
Support and resistance levels are clearly visible
The trends can last for weeks or even months. It is easier to trade with such instruments than with the major currency pairs. It is more reasonable to use classic strategies, and not to use intraday pips.
The USD MXN chart resembles the movement of the EUR/USD and GBP/USD currency pairs 10-20 years ago, when the trends were strongly pronounced. Therefore, when trading the Mexican currency, we use proven classic strategies that worked well before. Among them are trend-following, wave analysis, price patterns, Japanese candlesticks, Price Action.
Trading conditions vary considerably from broker to broker, so be sure to study the specification of the account types and choose what best suits your deposit.