Peso Vs USD
July 22nd 2008 04:53
When I was on Mazatlan, Mexico in February, the exchange rate was about 11 pesos to the USD. The exchange rate had been fairly stable for a least a year and a half. I looked today at the peso and discovered it is almost 10 pesos to the USD (see chart).
What does that mean to us and Mexicans? One big negative is the Mexican oil is priced in dollars, so instead of windfall profits, the oil money which accounts for 40% of the budget is 10% smaller.
And you know that immmigrants to the U.S. send money back home to their families.
The strengthening peso means that the $7.3 billion sent home in the first four months of the year lost about $366 million in value compared to last year's exchange rate, based on numbers from Mexico's central bank.
On the plus side, importers of American goods are doing more business because U.S. Goods are cheaper. It means that the Peso buys more, so we are seeing tourists from Mexico come to the U.S. and they are finding their Pesos are going farther.
So how long will the strong peso last? Analysts expect exchange rates to remain stable until the Federal Reserve increases interest rates to curb U.S. inflation, a move that strengthens the dollar. But experts say that Fed hikes could be mirrored by rate hikes by Mexico's central bank, which could keep the peso strong for the foreseeable future.
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