Foreign-exchange markets are producing an unusual three-way story: the Japanese yen, Colombian peso and Mexican peso are all strengthening, even though the forces driving them have little in
Foreign-exchange markets are producing an unusual three-way story: the Japanese yen, Colombian peso and Mexican peso are all strengthening, even though the forces driving them have little in common.
USD/COP fell to roughly 3,136 pesos per dollar on Sept. 4, down about 2.7% from Aug. 31 as the Colombian currency strengthened sharply. USD/MXN meanwhile slipped below 16.90, keeping Mexico’s revived “super peso” near its strongest levels in years. (investing.com) (investing.com)
The yen has staged an even more dramatic reversal. It gained roughly 2% against the dollar over the past week, its strongest weekly performance since July, after traders rapidly increased bets on another Bank of Japan rate hike.
Colombia’s 12% Rate Makes the Peso a Carry Trade MagnetColombia has one of the highest policy rates among major tradable emerging markets.
Banco de la Republica is holding its benchmark rate at 12%, after raising it by 75 basis points in June. The central bank says inflation remains elevated, with June headline inflation at 6.1%.
That creates a large yield advantage for investors willing to hold Colombian assets.
The peso also benefits when oil prices rise because petroleum remains an important Colombian export. Brent has recently traded above $90 as renewed U.S.-Iran fighting threatens Gulf supply.
There is a second domestic catalyst. Colombia’s new government has signaled a more supportive approach toward oil and mining investment after several years of declining exploration activity.
The combination of high interest rates, stronger oil and improving energy-sector expectations helps explain why COP has become one of the sharper recent FX movers.
Mexico’s Super Peso Is Becoming Too Strong for Some CompaniesMexico presents a very different story.
At the start of 2025, forecasters expected the peso to weaken toward 21 per dollar. Instead, USD/MXN has fallen below 17.
Reuters describes the renewed move as the return of the “super peso”, with MXN ranking among the strongest-performing emerging-market currencies despite weak economic growth and uncertainty surrounding U.S. trade policy.
Banxico is also keeping rates relatively high at 6.5%, helping preserve Mexico’s carry-trade appeal. The central bank expects inflation to return to its 3% target only in late 2027.
But peso strength has a downside.
Mexico sends more than 80% of its exports to the United States, meaning a stronger peso can reduce the value of dollar-denominated earnings when converted back into local currency. Some exporters are already reporting margin pressure.
CurrencyRecent levelMain driverBiggest riskCOPUSD/COP ~3,13612% rates + oilInflation/fiscal riskMXNUSD/MXN ~16.89Carry + resilient exportsStrong peso hurts exportersJPYUSD/JPY ~156BOJ hike expectationsPolicy disappointmentThe Yen Rally Could Matter Far Beyond ForexJapan is the outlier because its currency rally is being driven by a potential end to cheap funding.
Markets now see a very high probability of a 25-basis-point Bank of Japan hike at the Sept. 17–18 meeting. Japanese two-year bond yields have already climbed to their highest levels since 1995.
The yen’s strengthening is also visible against Asian currencies. JPY/PHP climbed from roughly 0.389 pesos on Aug. 28 to 0.401 on Sept. 4, an increase of around 3%.
That matters because the yen has long funded global carry trades. Investors borrow cheaply in Japan and deploy the money into higher-yielding assets elsewhere.
A sustained yen rally can force those positions to unwind.
Coinpaper previously examined that risk when the yen fell to a 40-year low. The situation has now reversed: traders are increasingly worried about yen strength, rather than weakness.
The broader U.S. Dollar Index also slipped around 0.7% over the latest week, helping currencies across several regions.
