Background on the Mexican Peso and its Recent Performance
The Mexican peso concluded the week with a decline against the US dollar, marking its largest drop since early April. This depreciation comes as a result of new tariffs imposed by US President Donald Trump.
According to data from Banco de México (Banxico), the Mexican currency closed at 18.8886 pesos per dollar, a decrease of 0.11% or 2.06 centavos. This is the third consecutive day that the peso has lost ground against the dollar.
On a weekly basis, the national currency depreciated by 1.84%, its largest drop since the week ending April 8, which saw a 2.34% decline.
Global Market Factors Contributing to Dollar’s Strength
Gabriela Siller, director of Analysis at Banco Base, explained that the US’s protectionist trade stance has led to increased risk aversion in global financial markets, bolstering the dollar’s strength.
“The US announced trade agreements with tariffs above 10%, which were in effect since April for most countries. The suspension of tariff increases for 90 days offers some relief, but it doesn’t eliminate uncertainty as tariffs remain in place despite the USMCA,” Siller added.
Furthermore, sectoral tariffs are being enforced, causing a 6.40% decline in US imports from Mexico’s automotive sector (January-May) and a 20.16% drop in iron and steel imports. Should tariffs persist, these sectors will likely continue to show annual declines.
Speculative Positions on the Mexican Peso
Net speculative positions on the Mexican peso have remained positive for a second consecutive week in the Chicago Futures Market.
During the week, net speculative positions in the Mexican peso rose to 56,100 contracts from 50,100 in the previous week, an increase of 1% or 6,000 contracts.
“This uptick signifies resilience following several weeks of gradual decline, though it still operates within a macro bullish structure that has characterized the peso in recent months,” Felipe Mendoza, analyst at ATFX LATAM’s Mercados Financieros, commented.
“The recovery from lower levels suggests that speculators are reaffirming their confidence in the peso, possibly anticipating future market movements and strategically positioning themselves before key events,” Mendoza concluded.
Key Questions and Answers
- Q: Why is the Mexican peso depreciating against the US dollar? A: The peso is losing ground against the dollar due to increased risk aversion in global financial markets, driven by US President Donald Trump’s protectionist trade policies and new tariffs on various countries.
- Q: What is the significance of net speculative positions being positive for the Mexican peso? A: Positive net speculative positions indicate that investors are optimistic about the Mexican peso’s future performance, suggesting they anticipate further appreciation.
- Q: How are sectoral tariffs affecting US imports from Mexico? A: Sectoral tariffs have led to a 6.40% decline in US automotive sector imports from Mexico (January-May) and a 20.16% drop in iron and steel imports, should tariffs persist.
