Mexican peso weakens amid Middle East tensions and Fed rate hike expectations

The Mexican peso has experienced significant depreciation, breaking the 17 pesos per dollar barrier following a period of stability. This decline is driven by a combination of geopolitical tensions in the Middle East and shifting monetary policy expectations in the United States.

Attacks on energy infrastructure in Saudi Arabia and maritime tensions near the Strait of Hormuz have increased global oil prices and heightened risk aversion, prompting investors to seek refuge in the US dollar. Simultaneously, markets are pricing in a high probability of an interest rate hike by the US Federal Reserve, which strengthens the dollar against emerging market currencies.

In Chile, the peso has also weakened, reaching its lowest level against the dollar in a month. This trend reflects a broader softening of Latin American currencies as traders position themselves ahead of upcoming central bank decisions from the Federal Reserve and Brazil’s Copom.