Mexico's peso has surged in 2013 as expectations that government reforms will boost growth improve the outlook for Latin America's second-biggest economy and spur foreign inflows. The peso will end the year at 12.15 per dollar, RBC wrote in a note today to clients in which it raised the forecast from 12.25.

“The bias in terms of the currency's direction is to remain strong,” Nick Chamie, RBC's global head of foreign- exchange strategy and the author of the report, said in a telephone interview. “We would focus primarily on the aggressive reform agenda and the likelihood that capital inflows are likely to remain also solid alongside the gains that Mexico is making in trade.”

Eoin Treacy's view The last decade offers a number of examples where improving standards of governance have resulted in stronger currencies, capital inflows and improving stock market performance. Brazil under Lula da Silva is one example and Mexico's outperformance over the last 18 months is another.

The US Dollar jumped by more than 50% against the Mexican Peso during the credit crisis; briefly reaching a peak near MXN15.5 in early 2009. It retested the MXN15 area in May and has held a progression of lower rally highs since. While somewhat oversold in the very short-term a sustained move above MXN13 would be required to question medium-term scope for additional weakness.

The stock market index is heavily weighted with the Mexican affiliates of Autonomies such as Exxon Mobil, Wal-Mart, SAB Miller, InBev, Coca Cola and Kimberly Clark. The Index has been trending consistently higher since 2009 and retested the region of the 200-day MA in March. A sustained move below the trend mean would be required to begin to question medium-term upside potential.

Despite the interlocution of the credit crisis Mexican government bond yields have been trending lower for much of the last decade and hit a new low last week. While somewhat overbought in the short-term a sustained move above 5.6% would be required to question medium-term scope for continued compression.