Yen Jumps 2%, COP Gains 2.7% as Mexico’s Super Peso Breaks Below 17

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 Magnet

Colombia 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 Companies

Mexico 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. 

The Yen Rally Could Matter Far Beyond Forex

Japan 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.