Mexico's 'super peso' rally: A boon for some, a burden for exporters

Mexico's currency, the peso, has staged a remarkable comeback, surging past 17 per dollar and earning the nickname "super peso" once again. The near-20% rally since January 2025 has made it one of the best-performing emerging market currencies, defying earlier expectations from the central bank and Wall Street that it would weaken toward 21 per dollar.

The rally is being driven by a combination of factors. A softer dollar, which has shed more than 10% against major currencies in 2025, is a key contributor. Additionally, carry-trade inflows are boosting the peso, as investors are drawn to Mexico's relatively high benchmark interest rate of around 7%, compared to about 3.75% for the U.S. Federal Reserve. Mexico's liquid markets and easy access to local assets also make it an attractive destination.

However, the peso's strength is not solely a dollar story. It has also gained against major currencies like the Swiss franc, suggesting domestic factors are at play. Analysts point to lower trade-risk premia, political stability, and solid macroeconomic conditions. Some investors also see Mexico as a beneficiary of the global AI boom, with computer server exports reaching nearly $83 billion in the first half of 2026, highlighting the country's move up the manufacturing value chain.

For an economy that sends over 80% of its exports to the United States, the strong peso is a mixed blessing. It lowers costs for importers but squeezes exporters' margins. Several major companies, including tequila maker Becle, bread producer Grupo Bimbo, and Carlos Slim's Grupo Carso, have reported that currency strength weighed on their latest quarterly performance. While the impact is visible in corporate reports, it remains difficult to spot in broader data, as exports continue to grow impressively.

The rally's sustainability is a key question. Recent gains have been fueled primarily by "fast money" investors, such as hedge funds and short-term traders, rather than long-term institutional buyers like pension funds, who have largely stayed away since the 2024 election. Data shows speculative net long peso positions are approaching levels not seen since early 2023.

The biggest risk to the rally is uncertainty surrounding trade policy. The U.S. administration declined to renew the USMCA trade pact for a new 16-year term, instead opting for annual reviews that prolong uncertainty. Analysts also warn that crowded speculative positioning could leave the peso vulnerable to a sharp reversal if investors begin unwinding their long positions.