In a new set of developments, the US dollar is losing its purchasing power to a new contender. The Mexican peso is now rising rapidly in terms of valuation, challenging the USD in a novel manner.
The US dollar has depreciated significantly in the last two decades. Per historical statistics, the USD’s purchasing power has decreased by 90% since its inception, driving its value to hit new valuation lows.
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Mexican Peso: The New King?
The US dollar is weakening amid rising inflationary pressure and mounting debt ratio metrics. Amidst the chaos, the calls for de-dollarization have been further intensified, giving regional currencies a chance to rise above the occasion.
Capitalizing on the current USD prospects, the Mexican peso is now rising in value, giving stiff competition to the dollar’s supremacy. Per a new NBC San Diego report, funds sent from the US to Mexico do not yield the same terms as they did earlier. The yield gap is now widening as the multi-polar currency concept gains prevalence in the current financial domain.
However, the overvalued peso is also creating a bit of unrest within the Mexican tourism division. With the USD crisis deepening, the nation’s tourism metrics have noted a sharp decline as trips to Mexico have now become expensive for US citizens.
“Funds sent from the United States to Mexico no longer yield the same return as they did when the dollar was at the average of 18 pesos per unit. By having an overvalued peso between 15% and 20%, according to the economist, the purchasing power of tourists on the other side of the border has also decreased.”
With the US minting trillions of dollars every 90 days, the value of the USD has taken a direct hit, injuring its valuation on a global scale. The US debt metrics are showing no signs of stopping, with the government poised to pay $1.2 trillion in interest alone.
“The U.S. currency has lost value against all other currencies because there’s a lot of dollars in circulation,” Jorge Fonseca, an economist in Tijuana, told NBC 7’s sister station Telemundo 20.
USD Global Reserve Status in Danger.
A new prediction by SEBI analyst Amit Kumar Gupta elaborates on the current financial prestige of the USD. Per Gupta, the status of the USD as a global reserve currency may have peaked and might show signs of erosion earlier than the predicted timelines.
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“The share of global trade invoiced in USD terms and the USD reserves of global central bankers have witnessed a consistent decline in recent years. The cross-border flow of funds from the US has witnessed a sharp rise in FY24. Unsustainable US public debt has led to a downgrade of the US sovereign rating outlook in 2023.” Gupta shared