US Dollar Strengthens Against Mexican Peso Despite Risk Aversion Following Mixed US Non-Farm Payrolls

Time Stamp: March 10, 2023 10:23 PM
Source Node: 2511931

The US dollar has strengthened against the Mexican peso despite risk aversion in the wake of mixed US non-farm payrolls. The US dollar index, which measures the greenback’s performance against a basket of six major currencies, rose 0.3 percent to 97.32 on Friday, its highest level since April. The US dollar has been on a steady climb since the beginning of the year, gaining more than 2.5 percent against the Mexican peso.

The rise in the US dollar is attributed to the mixed US non-farm payrolls report released on Friday. The report showed that the US economy added 164,000 jobs in July, below expectations of a 190,000 increase. The unemployment rate also ticked up to 3.7 percent from 3.6 percent in June. Despite the weaker-than-expected jobs report, the US dollar still managed to strengthen against the Mexican peso as investors sought safety in the greenback amid risk aversion.

The Mexican peso has been under pressure in recent weeks due to concerns over Mexico’s economic outlook. The country’s economy is expected to contract by 6.6 percent this year due to the impact of the coronavirus pandemic and a sharp drop in oil prices. The Mexican government has implemented a series of measures to support the economy, including tax cuts and increased spending on infrastructure projects. However, these measures have not been enough to offset the economic damage caused by the pandemic.

The strengthening US dollar and weakening Mexican peso have had an impact on cross-border trade between the two countries. The US is Mexico’s largest trading partner, accounting for nearly 80 percent of its exports. A stronger US dollar makes it more expensive for Mexican companies to purchase US goods and services, while a weaker Mexican peso makes it more difficult for US companies to export their products to Mexico.

The US dollar’s strength against the Mexican peso is likely to remain in place in the near term as investors remain cautious in the wake of mixed US non-farm payrolls and concerns over Mexico’s economic outlook. However, any improvement in Mexico’s economic outlook or a pickup in global risk appetite could lead to a reversal of the current trend.