The rate of productivity growth in the United States diminishes sharply: The diminishing productivity growth means low export and high import. firms to invest in Mexican oil fields: Purchasing or sharing in Mexican oil fields will increase the demand for pesos at the FOREX market. demand for Mexican products will increase demands for pesos, the peso will appreciate. Mexican products become more fashionable to U.S. A surge in supply will depreciate the peso.į. currency, for example the US dollar, given that floating exchange rate. Mexicans will supply peso to the FOREX market. Mexican peso exchange rate has not been that different than the one of currencies. Effective exchange rates Effective exchange rate indices 26 January 2023 The BIS has revised and updated the weights used in the effective exchange rates (EER) so that the most recent weights refer to 2017-19 period.

The United States engages in a high-interest-rate monetary policy: The high-interest rate will attract loans for Americans, and Mexicans will purchase more bonds. economy moves into a severe recession: Income of Americans will reduce during the recession due to which demand for pesos falls. Deteriorating political relations reduce American tourism in Mexico: Reduction in tourism in Mexico will reduce demand for pesos (by Americans) thereby, the peso depreciates.ĭ. The demand for dollars increases, resulting in the peso depreciating.Ĭ. If the US risk-free rate is 5 and the Mexican risk-free rate is 3, calculate the arbitrage profit available. There is a forward contract available today calling for an exchange rate one year forward of MXN 18.75 / USD 1.00. Mexico encounters severe inflation: Mexicans will purchase relatively low-priced goods in the U.S. Suppose that the spot exchange rate between the US Dollar (USD) and Mexican Peso (MXN) is MXN 20.00 / USD 1.00. Assuming a system of flexible exchange rates between Mexico and the United States, indicate whether each of the following will cause the Mexican peso to. The Bank of Mexico raised it key interest rate by 25 basis points as expected, to 11.25. American’s demand for pesos in the FOREX market increases hence peso appreciates.ī. Mexican Peso retreats after decision, USD/MXN climbs to 18.10. The United States unilaterally reduces tariffs on Mexican products: the export of Mexican products will increase due to the reduction of tariffs by the U.S. Determinants of flexible exchange rates include (a) changes in tastes (b) relative national incomes (c) relative inflation rates (d) real interest rates (e) relative expected returns on stocks, real estate, and production facilities and (f) speculation.Ī.

Mexico us exchange rates