Traders Are Tripling Their Money on This Bet

The Mexican peso has been one of the standout performers of 2025, up roughly 10% against the USD so far this year. 

What’s behind the move? 

A powerful mix of carry trade demand, steady inflation, and U.S. rate-cut expectations.

Mexico’s economy has quietly become one of the most attractive carry trade destinations in global FX.

With the Banco de México’s benchmark rate still sitting at 7.50%, investors earn a juicy yield compared to 4% rates in the U.S.

When traders borrow in low-yield currencies (like JPY or CHF) and buy high-yielders like MXN, they pocket the interest difference — known as the carry.

As long as volatility stays low and U.S. yields continue to drift lower, the carry trade stays alive and USDMXN keeps grinding down.

The story isn’t just about Mexico, it's about what’s happening in the U.S. too.

The U.S. 2-year yield is now sitting near 3.5%, signaling that two rate cuts are likely coming in the next few months.

Markets are pricing in a softer Fed stance as inflation cools and unemployment edges higher.

If those trends continue, the USD could face more pressure.

That’s why speculative short positioning in USD/MXN has been growing steadily in recent weeks.

From a technical perspective, USD/MXN remains locked in a clear bearish structure, printing lower highs and lower lows throughout the year.

The pair has fallen from around 20.50 in January to below 18.50, a drop of roughly 10%. If price breaks below 18.00, we could see another wave of selling toward 17.00.

Carry trades can run for a long time… until they don’t. The key risk here? A spike in volatility or any shift in Banxico’s tone.

So far, the central bank has been cautious signaling it will cut rates slowly to avoid stoking inflation again. As long as Mexico stays relatively stable and the Fed keeps easing, the peso’s advantage remains intact.

But if U.S. data surprises to the upside or global risk sentiment turns, expect profit-taking to kick in fast.

The trade is simple and it’s been working:

As long as yields stay wide and volatility stays low, the peso remains one of 2025’s strongest plays.