The devaluation trend of the Mexican peso is approaching the exchange rate of 20 per dollar – London Business News

The Mexican peso is experiencing its third consecutive day of depreciation, falling more than 1% against the dollar and quickly approaching the psychological level of 20 pesos per dollar.

These pressures reflect the interplay of internal and external factors that are affecting investor confidence in the Mexican currency.

Internationally, emerging market currencies have recently been under pressure due to uncertainty surrounding the Chinese economy.

Recent economic data from China and the lack of substantial fiscal stimulus have raised concerns in global markets. This adverse global environment has exacerbated the volatility of the Mexican peso, which is often sensitive to risk perceptions in emerging markets.

In addition, the peso was hit by former President Donald Trump’s rise in poll numbers in the United States. The improvement in his political standing has renewed concerns about possible protectionist measures that could be implemented if he returns to the White House.

Trump has proposed imposing tariffs of more than 200% on vehicles imported from Mexico, a move that could have a significant impact on Mexico’s auto industry and the balance of trade between the two countries. These statements increase uncertainty about the future of trade relations under the USMCA and prompt caution among investors.

Meanwhile, President Claudia Sheinbaum’s efforts to reassure the business community appear to have had limited impact. Although she met with 240 business leaders from the United States and Mexico and emphasized her commitment to respect for institutions, doubts remain about the policies her administration will pursue.

Historically, announcements of new investments in a protocol context do not always result in effective capital flows. The example of Tesla’s “Gigafactory,” which was announced more than a year ago and has not yet been implemented, is a reminder of the structural challenges Mexico faces in attracting foreign direct investment.

The outlook is further complicated by the recent strength of the US dollar. As expectations of aggressive interest rate cuts from the Federal Reserve fade toward the end of the year, the dollar has gained ground, putting additional pressure on the peso and other emerging market currencies.

Looking ahead, upcoming GDP data from China could be a key catalyst for emerging markets. Weaker-than-expected economic performance in China could increase risk aversion and negatively impact currencies tied to economic growth, such as the Mexican peso. In summary, the peso faces a complex environment in which external factors such as uncertainty in China and political dynamics in the United States are coupled with internal concerns about the policies of the new government.”