Against a backdrop of political uncertainty and renewed trade tensions, the Mexican peso staged a surprising rally in 2025, appreciating 15.6% against the US dollar. This performance placed it among the top five global currencies for the year, surpassed only by the Russian ruble and a handful of others. The peso’s resilience has defied expectations shaped by mid-2024 volatility, when markets recoiled from proposed judicial reforms and the re-election of Donald Trump in the United States.
The peso had plunged from 16 to nearly 21 per dollar in the wake of Mexico’s June 2024 elections, which handed legislative dominance to Morena and revived concerns over institutional independence. Trump’s return to the White House later that year added pressure, as unilateral tariffs and a more confrontational trade posture toward Mexico reawakened fears about the durability of the USMCA framework. Yet by December 2025, the peso was nearing 18 per dollar, buoyed by a confluence of domestic and external factors.
Foremost among these was a weakening US dollar, which lifted many emerging market currencies. But Mexico’s case was distinct: its external accounts remained robust despite trade frictions. Monthly exports averaged $66.1 billion, while remittances reached $62 billion over the twelve months through October. Foreign direct investment totaled $40.9 billion through the third quarter, exceeding expectations and underscoring continued investor confidence in Mexico’s industrial base and geographic proximity to the US market.
Markets appear to have priced in political risk—at least for now.
The Bank of Mexico’s Financial Stability Report cited Mexico’s ability to weather US trade actions as a key factor supporting the peso. The report also highlighted low currency volatility and favorable conditions for carry trade strategies—where investors borrow in low-yield currencies to invest in higher-yielding ones—as drivers of peso demand. Despite interest rate cuts in Mexico during the year, its rates remained sufficiently attractive relative to declining US yields to sustain inflows.
This macroeconomic stability offered investors a degree of insulation from political noise. While institutional reforms and uncertainty around autonomous bodies remain unresolved, markets appear to have priced in these risks—at least for now. The peso’s appreciation in the second half of 2025 alone was 7.9%, trailing only Colombia and Hungary among major currencies. Such momentum suggests that yield-seeking capital continues to view Mexico as a credible destination amid broader global volatility.
However, structural risks linger. Interest rate differentials with the US are narrowing, which could dampen carry trade inflows in 2026. Moreover, the looming renegotiation of USMCA introduces uncertainty that may test investor nerves. If institutional reforms deepen or trade tensions escalate further, currency volatility could return. For now, though, Mexico’s macro fundamentals have proven more influential than its politics—a dynamic that may not hold indefinitely.
