Where is the Peso going?

It hasn’t been a good time to be paid in Mexican Pesos if you are thinking in US Dollars.  This isn’t really the most helpful way to think about the situation, but it is almost inevitable when you have bills to pay in the US and you live and work in Mexico.  It is probably best to ignore this if you are saving Pesos and planning to spend those savings upon your return to the US.  That hasn’t stopped me from thinking about it.

Since August 4th of last year the cost of a US Dollar has gone from costing $9.87 Pesos to $15.24 Pesos (as of March 4th).  This is an increase of over 60% in about 7 months and is the largest increase in recent history.  The other day I was looking at the graph on Google Finance and realized that the progression from August was nearly linear.  So I graphed out the trend in Excel and sure enough it was close to linear (with the exception of a peak in November and December).

Click for larger version

So back to the title of the post; I’m not a financial analyst (but I play one on the web) and my prediction is as likely to be completely wrong as it is to be even slightly right, but if you push the trend line out a few months in the future, where is the peso going?  As you can see from the graph to the left, it looks like we are heading towards $20 pesos to the dollar by September.  That’s a 100% increase in a bit more than a year.  That’s probably good news if you live in the US (as goods and services from Mexico are cheaper) and also good if you are planning to travel to Mexico anytime soon.  For expats living in Mexico with US funds, this is also good news, although getting your favorite US made products from the local Walmart is going to get pricy.  For expats, like me, who earn their living in Pesos, this is very bad news. The average Mexican is going to feel the pinch as well, since imported consumer goods are going to cost a lot more.

Hopefully my projection is wrong (and like I said, it probably is), but so far the peso doesn’t seem to be going anywhere but down.