The Mexican peso extended its winning streak to five days in Thursday morning trading to reach its strongest position against the US dollar since late September.

Bloomberg data shows that the peso appreciated to 17.22 to the dollar just before 8 a.m. Mexico City time. The last time the peso was stronger than that level was Sept. 22 when it closed at 17.20 to the greenback.

At 10 a.m., the peso was trading at a slightly weaker 17.26 to the dollar.

The peso closed at 17.82 to the greenback last Thursday but has appreciated every trading day since then. It reached 17.65 last Friday, 17.61 on Monday, 17.34 on Tuesday and 17.30 on Wednesday, according to Bloomberg.

The peso’s latest winning streak began last Friday with a general weakening of the US dollar.

The DXY index, which measures the value of the dollar against a basket of foreign currencies, also fell on Thursday morning after data showed that claims for unemployment benefits in the United States increased to a three-month high last week.

“The dollar edged lower on Thursday after US jobless claims rose more than expected last week, indicating a cooling labor market that could prompt the Federal Reserve to cut interest rates in early 2024 and engineer an economic soft landing,” Reuters reported.

In Mexico, inflation declined for a ninth consecutive month in October, but the Bank of Mexico has maintained its benchmark interest rate at a record high 11.25% since March as the headline inflation rate remains above its 3% target.

The Mexican peso, which was trading at about 19.5 to the dollar at the start of 2023, has benefited this year from the significant difference between interest rates here and those in the US, which are currently set at a 5.25%-5.5% range.

Bank of Mexico Governor Victoria Rodríguez told the El Financiero newspaper earlier this week that “the improvement in the inflationary outlook we’re anticipating could allow us to begin discussing in future [monetary policy] meetings the possibility of adjusting our reference rate downwards.”

She said that cuts to the key interest rate will occur when macroeconomic conditions allow them, adding that “we do not see that for the rest of this year.”

The Bank of Mexico (Banxico) board will hold its final monetary policy meeting of the year on Dec. 14, but based on Rodríguez’s remarks an initial cut to the 11.25% rate appears unlikely before 2024.

The central bank governor also said that interest rate cuts, when they come, will be “gradual” and won’t necessarily be “continuous,” indicating that the benchmark rate could be lowered and then held at the new level through subsequent monetary policy meetings.

Banxico raised its benchmark rate by 725 basis points during a hiking cycle that began in June 2021 and concluded in May with the decision to hold the rate at 11.25%.

The peso was trading at close to 20 to the US dollar when the tightening cycle began and below 18 when it ended.

The currency reached its strongest position of 2023 – and in almost eight years – in late July when it traded at 16.62 pesos to the dollar.

In addition to the difference between interest rates in Mexico and the United States, strong incoming flows of foreign capital and remittances are among the factors analysts have cited for the strengthening of the peso this year.

With reports from La Jornada