Crédit Agricole Sees Mexican Peso Losing Around 9% Vs US Dollar
By Aboki Forex —
Crédit Agricole expects the Mexican Peso to weaken even as much of the emerging-market sector withstands higher US interest rates. The bank forecasts the USD/MXN exchange rate at 18.00 in December 2026, 18.25 in March 2027, 18.50 in June, 18.75 in September and 19.00 in December 2027.
Against the bank's 22 September reference rate of 17.27, the final target implies a 10% rise in USD/MXN. That is equivalent to roughly a 9.1% fall in the Peso's Dollar value.
Mexico singled out for weakness
Crédit Agricole explicitly separates Mexico from its more favourable regional views. “From an FX regional angle, we expect a slight appreciation of Asia vs the USD, and of CE4 vs the EUR, but expect more weakness in Latam (the COP and MXN in particular).”
High yields are not enough
The bank acknowledges that emerging-market currencies have resisted pressure from rising US yields. “Since the beginning of July, the US 10Y yield has increased by about 60bp. Yet, during the same period, our EM FX index appreciated vs the USD.”
On the interest-rate advantage over the US, it adds: “Third, the average EM-US carry gap has remained decent, in spite of the recent increase in US short-term rates. This is because higher oil prices have also put a floor under EM short-term rates.”
But the bank does not expect a broad rally. “We do not expect a full-fledged appreciation of EM FX vs the USD.”
For Mexico, Crédit Agricole forecasts the policy rate remaining at 6.50% through December 2027, matching the current rate in Banco de México's official figures. The distinction between interest income and currency performance also featured in Rabobank's warnings about Peso carry in May.
What it means for carry traders
Attractive yields alone do not invalidate Crédit Agricole's forecast. Investors can collect interest while losing value when Peso holdings are converted back into Dollars.
For Nigerian businesses and consumers watching emerging-market currency risk, the lesson is similar. A high policy rate is not the same as a strong currency. Interest income can be wiped out by conversion losses.