The Mexican Peso is the third best performing EM currency in 2022 after the RUB and BRL and analysts at Société Générale believe this run could carry on into 2023.

MXN offers good positive total return potential on a 12-month horizon

“The main downside risks stem from sluggish US and growth outlook, the weakening of Mexico’s terms of trade (lower commodity prices). However, the tailwinds from attractive carry-to-vol, macro stability and low external imbalances mean the Peso may still outperform Latam peers next year.”

“MXN should also benefit from FDI inflows relating to Mexico remaining a strategic investment hub for US near-shoring and re-shoring from China.”

“Our house call is for USD/MXN to gradually rise towards 20.25 by end-2023.”

“With the policy rate of 10.50% and benchmark 10y yield near 9%, we think the Peso offers good positive total return potential on a 12-month horizon.”