The peso continued its recent downward spiral Tuesday, breaking the 19-peso barrier before settling at 19.41 (Bancomer) on Thursday afternoon.
This week’s losses confirmed the peso as Latin America’s worst performing currency of 2016 – a drop of around 8.5 percent since January 1.
Tuesday’ numbers were the worst since mid-February when Mexico’s central bank dramatically decided to raise interest rates by 0.5 points in the middle of the month.
Various factors are contributing to this rocky period for the peso, analysts agree. Traders are seeking the comfort of the dollar as the price of oil stays low and concerns grow over a slowdown in the global economy. In addition, the potential negative impact of Great Britain voting to leave the European Union at the end of June is affecting global markets.
A”Brexit” vote on June 23 – as current opinion polls suggest – could see investors turn their backs on emerging market currencies such as the peso, analysts are saying. That would almost certainly push Mexico’s currency through the 20-peso barrier, many agree. And that in turn could lead to yet another interest rate hike when Mexico’s central bank gathers for a policy meeting on June 30.
In addition, analysts, including the Wall Street Journal and Bloomberg, have highlighted how the rise of Donald Trump, and the presumptive Republican candidate’s possible ascendancy to the White House, is either already affecting the peso in a small way, or will substantially influence it in the months ahead.
A Trump presidency that fulfills his promises to stop migrants from sending home remittances and deporting thousands of illegal workers would inevitably have a devastating effect on the Mexican economy and its social fabric. Any indication that Trump could triumph in November will further weaken the peso, most analysts concur.