Background on the Mexican Peso and its Current Situation
The Mexican peso is experiencing its second consecutive day of decline against the US dollar, as the market absorbs news about tariffs imposed by United States President Donald Trump.
Market Performance
On Tuesday morning, the local currency is weakening, with the spot exchange rate falling to 18.7021 pesos per dollar. This represents a decrease of 5.86 centavos, or 0.31%, compared to Monday’s closing rate of 18.6435 pesos per dollar, according to official data from Mexico’s central bank, Banco de México (Banxico).
The dollar’s value is fluctuating between a high of 18.7021 pesos and a low of 18.6108 pesos. Meanwhile, the Intercontinental Exchange’s Dollar Index (DXY), which compares the US dollar to a basket of six currencies, is up by 0.17% at 97.73 units.
US Trade Tensions and Tariff Announcements
President Trump has sent letters to 14 countries, including major Asian trading partners Japan and South Korea, informing them of upcoming tariffs. However, he has postponed the implementation of these tariffs until August 1st, rather than the previous deadline on Wednesday.
“Market volatility is expected to persist in the coming days as President Trump escalates trade pressure and uncertainties surrounding interest rate paths grow,” stated CopKapital. “The critical factor will be how inflation responds to the new tariff measures.”
Local Market Expectations
Domestic traders are anticipating the release of minutes from Banxico’s latest meeting, scheduled later in the week. During this gathering, the bank’s governing board reduced its benchmark interest rate by a quarter percentage point for the fourth consecutive time.
Key Questions and Answers
- What is causing the Mexican peso to weaken? The primary reason for the peso’s decline is the strengthening US dollar and market absorption of news regarding tariffs imposed by President Donald Trump.
- Who are the countries affected by Trump’s tariff announcements? President Trump has sent letters to 14 countries, including significant Asian trading partners Japan and South Korea, informing them of upcoming tariffs.
- When will these tariffs take effect? The implementation of the tariffs has been postponed until August 1st, rather than the initial deadline on Wednesday.
- What factors will influence market volatility? Market volatility will be driven by President Trump’s escalating trade pressure and uncertainties surrounding interest rate paths, particularly how inflation responds to new tariff measures.
- What is the recent action taken by Banxico? Banxico’s governing board has reduced its benchmark interest rate by a quarter percentage point for the fourth consecutive time during their latest meeting.
