MEXICO CITY Mexico's peso on Friday hit its highest level against the dollar since December 2015, as the greenback lost steam after U.S. data on easing inflation bolstered the case for the Federal Reserve to end its interest rate hikes.

The peso, which has been on a recent tear, strengthened over 1.3% against the dollar in morning trading.

Data pointing to softening U.S. inflation on the one hand and better-than-expected economic activity data on the other has helped weaken the dollar and boost the peso, explained Banco Base analyst Gabriela Siller.

"What's happening with the peso right now is due to weakness in the dollar, but also because of optimism surrounding the Mexican peso ... and with this international investors keep buying Mexican pesos and it may keep appreciating," said Siller.

(Reporting by Aida Pelaez-Fernandez and Anthony Esposito)