The Mexican peso has fallen by 2.75% in the past week, recording the steepest single-week decline since March; meanwhile, on Friday, the dollar closed at nearly 1 dollar to 17.71 pesos.

Earlier in September, the US dollar fell below 16.90 against the Mexican peso, which means that the dollar has risen by about 5% in just a few weeks from that low point.

Before this reversal, the Mexican peso had been strengthening for several months in a row, repeatedly breaking through the 17 pesos to 1 dollar exchange rate, reigniting discussions in the market about a "super peso" for Mexico.

Today, many of the carry trade strategies that previously supported the Mexican peso are developing in the opposite direction.

The Mexican Central Bank maintains its interest rate at 6.50% unchanged, while the Federal Reserve takes a more hawkish stance.

The direct catalytic factor is monetary policy.

On September 24, the Mexican Central Bank maintained its benchmark interest rate at 6.50% unchanged, marking the third consecutive meeting without any adjustments.

Meanwhile, the Federal Reserve of the United States recently raised its policy interest rates to 3.75% to 4.00%, and several Fed officials have stated that if inflation remains high, further policy tightening may be necessary.

The reason this is important is that one of the biggest advantages of the Mexican peso has always been Mexico's relatively high interest rate levels.

Investors can borrow currencies with lower yields and then hold assets denominated in pesos to earn the interest rate differential, which is precisely the classic arbitrage trade.

But this interest rate spread is narrowing.

With the Mexican Central Bank's interest rate at 6.50% and the upper limit of the Federal Reserve's interest rate range at 4.00%, the current interest rate differential between the two is only 2.5 percentage points. If markets expect further interest rate hikes in the United States, or if Mexico reduces interest rates in the future, this differential may narrow even further.

Higher U.S. yields have also affected other markets. The yield on 10-year U.S. Treasury bonds has risen above 5%, making U.S. dollar assets increasingly competitive compared to emerging market transactions.