USD/MXN falls to its lowest level since January 2021, near 19.50

• The Mexican peso is among the best performers on Friday.
• USD/MXN is trading at the lowest level since January 2021.
• The appetite for risk, the weakness of the dollar and an aggressive Banxico support the rise of the MXN.

The USD/MXN is falling sharply on Friday, with the Mexican peso leading across the board. The pair fell to 19.56, hitting the lowest intraday level since January 2021.

The combination of technical factors, dollar weakness, steady US yields and risk appetite pushed USD/MXN further lower. It is heading for the lowest weekly close since March 2020.

The break below the support zone around 19.70 added downward pressure. The next critical support is seen at the 19.50 area followed by 19.30. To alleviate the downward pressure, the dollar needs to get back above 19.90.

Stock markets rise again on Friday. On Wall Street, the S&P 500 gains 1.64% and is up more than 5% for the week. The main indices are about to register the first gain after seven consecutive weeks of falls. Improved market sentiment boosted demand for emerging market currencies.

The weakness of the dollar and the stability of the yields also contribute to the decline of the USD/MXN. DXY falls 0.15%, about to post the lowest daily close since April 25. At the same time, US yields remain stable, not reacting to risk appetite. The 10-year US Treasury bond yield stands at 2.72%, slightly above the weekly low.

Another positive factor for the Mexican peso was the “aggressive” minutes of Banxico’s last meeting, in which it raised rates by 50 basis points, to 7%. “The minutes show that more policymakers were open to a bigger move, as another said it would bolster the bank’s autonomy and have more of an impact on long-term inflation expectations,” analysts at Brown Brothers Harriman said. The next council meeting is June 23.

USD/MXN weekly chart

Technical levels