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By Isabel Woodford and Aida Pelaez-Fernandez
MEXICO CITY, March 3 (Reuters) - The Mexican peso broke
the key 18.00 pesos per dollar barrier for the first time in
nearly five years on Friday, lifted by Mexico's solid fiscal
position, healthy inflows of remittances and a widening rate
differential between Banxico and the U.S. Fed.
The gap between interest rates in Mexico and the United
States, as the Bank of Mexico, known as Banxico, enacted a
bigger-than-expected 50 basis points rate hike last month, has
helped to fuel the peso.
Mexico's currency has also benefited from a robust inflow of
remittances, growth in exports and foreign direct investment.
Banxico governor Victoria Rodriguez pointed to several
macroeconomic factors supporting the peso, including Mexico's
solid fiscal position relative to other emerging economies,
external accounts at sustainable levels, increased remittance
flows, and a very stable ratio of debt to GDP.
"And the rate differential between Mexico and the United
States has also, of course, contributed," Rodriguez said in a
quarterly report on Wednesday.
The peso's gains are a likely boon for President Andres
Manuel Lopez Obrador, who often touts its strength as one of his
government's big accomplishments.
In early morning trading the peso slipped past 18.00
per dollar, appreciating to 17.9760, a level it had not reached
since April 2018. It then pared back some of its gains.
The peso has steadily gained pace in recent months, first
creeping below 19 pesos in January and gaining more than 2.5%
this week alone.
Gabriela Siller, at Banco Base, flagged the general weakness
of the U.S. dollar, which is on track for its first weekly loss
since January against major currencies amid uncertainty around
the Federal Reserve.
Private sector analysts polled by Banxico expect the peso
to lose some steam before the end of 2023, forecasting it would
end the year at 19.80 pesos per dollar.
(Reporting by Aida Pelaez-Fernandez and Isabel Woodford;
Editing by Anthony Esposito and Alistair Bell)
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