Mexican peso likely to appreciate gradually next year

The beginning of Mexico's tightening cycle early next year will likely help support the peso. 

On average, currencies would take 32 months from peak overvaluation to bottom undervaluation. The Mexican peso is close to its bottom undervaluation. Assuming the overvaluation peaked in the early part of 2013, it would place the bottom right around the last quarter of this year. 

"17-17.25 is forecasted to be the peak in USD/MXN and a gradual appreciation next year. The main trigger for this turnaround will likely be the initiation of a tightening cycle, most likely a couple of months after the Fed lift-off in March next year", says  RBC capital markets. 

The policy mix is likely to turn somewhat by then towards tighter money but easier fiscal.