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What's behind the strength of the Mexican peso?

by Take Two®

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Picture of the Mexican five hundred peso note taken on December 27, 2011 in Mexico City. YURI CORTEZ/AFP/Getty Images

The Mexican peso now buys more dollars than it has at any time in the past five years. That edge in currency exchange means shoppers coming north into the U.S. are finding lots of bargains. But why is the peso doing so well?

To find out, we've reached Marcela Meirelles, head of Latin American research at the LA-based investment firm, TCW.

She says the peso has increased in value against the dollar by about five percent in the past year. But it's still down significantly from the levels it reached before the financial crisis.

Meirelles points to a couple of factors that are now pushing up the value of the Mexican currency.  She notes that increasing wages in China have made it more attractive for producers - especially U.S. companies - to manufacture goods in Mexico.  Government plans for reform, she says, are another reason traders have been bidding up the peso.

While a stronger peso might cause prices to increase for Mexican consumers, TCW's Meirelles believes, overall, it's a good thing for the Mexican people.  She says the country's good economic fundamentals, coupled with expected governmental reforms, mean Mexico's future is looking brighter.

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