What happens if the dollar falls and how the Mexican peso strengthensMediotiempo


One of the news that has given the most talk in recent hours has been the value of the Mexican peso against the dollarsince he had his best record since February 2020 and now was quoted at 18.9795 but: what are the advantages and why does it happen?

What happens if the dollar falls in value? The advantages

It should be noted that the price of the dollar is extremely important in the world because, according to data from the International Monetary Fund, close to the 60% of currencies of world banks are in dollars and Mexico is no exception.

One of the benefits of a lower dollar is that businesses, whether large or small, have to invest less for the purchase of products, items or machinery. The inputs are cheaper and this can cause the prices of the different products fall to the benefit of the consumermainly of elements that are acquired from abroad such as electronic devices (computers, televisions, cell phones, etc.).

Why is the dollar falling?

It is due to several reasons, although the first of them for the stability of the Mexican currency which begins to occur for the first time in years, especially after passing the “bitter pill” of the Covid-19 pandemic.

Why is the Mexican peso strong?

According to Expansión, the Mexican currency has been favored by a series of factors, including:

  1. Wide interest rate differential between Mexico and the United States.
  2. A strict fiscal stance by the Mexican government.
  3. Sound external finances.
  4. Mixed macroeconomic and corporate data in the United States.
  5. High weight operability.
  6. Increase in income from remittances.
  7. Greater foreign direct investment.
  8. Increase in oil prices.
  9. Low foreign participation in domestic bond markets.
  10. Stability in the trade balance.
  11. Recovery of international tourism.
  12. Stable ratings on the risk of investing in Mexico.

It also happens because the market in general begins to create a demand for other currencies and the purchase of dollars begins to decline. Another point, points out the Expansión site, indicates that “instruments from other countries offer more attractive yields” and interest in the North American market is reduced.

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