(Bloomberg) -- Hedge funds continue to boost bullish bets on the Mexican peso, strengthening its position as the best major currency in the world and keeping it on track to reach fresh highs.

Derivatives data from the Commodity Futures Trading Commission show leveraged funds are the main force behind the peso’s strength, increasing holdings to 57,711 on the week through April 9 — the highest since March 2023. It was the biggest move in three weeks, and almost double the one seen the prior period. 

The peso is up 0.3% versus the dollar on Monday, leading gains among majors as markets settle after a days-long selloff sparked by changing bets on US interest rates and rising Middle East tensions. Almost all emerging currencies slid versus the dollar last week. 

The peso — the most liquid currency in Latin America, and the only one that trades around the clock — benefits from the view that diplomatic efforts will help prevent the conflict between Iran and Israel from escalating. As soon as Treasury yields decline, signaling a move into risk-on, the peso is back as the number one choice in emerging markets.

The currency’s attractive carry-to-volatility ratio and hawkish central bank also help attract dollar inflows, and Mexico’s close ties to the US create a natural cushion at times emerging-market currencies are negatively impacted by a strong activity data from the world’s largest economy.  

Read More: BofA Scraps Advice to Short Mexico’s ‘Most-Crowded-Ever’ Peso

The peso is the only major currency appreciating against the dollar this year, and has gained almost 25% since the end of 2016, by far the best in the world. It has no technical resistances nearby, leaving the path open for an appreciation toward 16 per dollar technical level, which would be the highest level since July 2015.  

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