The Mexican peso continues to navigate turbulent waters as it depreciated by 0.49% on March 21, 2025, closing around 20.25 pesos per dollar. This depreciation, amounting to a loss of 9.8 centavos, came as financial markets grappled with heightened risk aversion tied to global economic growth concerns and impending tariffs proposed by former President Donald Trump.
The exchange rate for the peso touched a minimum of 20.1353 and a maximum of 20.2755 pesos per dollar during the trading session. Analysts indicate that the current turbulence is influenced by several converging factors, including expectations for the U.S. Federal Reserve's cautious approach to interest rate cuts, as emphasized by the president of the Federal Reserve Bank of Chicago, Austan Goolsbee. In a recent interview, Goolsbee stated, "It is not realistic to know the path that monetary policy will follow," signaling a potential delay in rate adjustments.
The situation was further complicated by the phenomenon known as Triple Witching, where significant stock derivatives contracts expire, typically every three months. This renewal process forces investors to adjust their portfolios, which, as noted, could lead to increased volatility and potential losses in capital markets.
The dollar index observed a mild 0.17% increase amid these global fluctuations. Various currencies exhibited depreciation, with the Israeli shekel, Brazilian real, Turkish lira, and the Mexican peso among the most affected. On the other hand, the Indian rupee appreciated slightly following signs of a strong local economy.
In related news, the Japanese yen saw a rise due to Japan's February inflation rate reported at 3.7%, outperforming market expectations of 3.5%. This led to speculation about Japan's central bank considering raising interest rates if the U.S. trade policies provide more clarity.
Meanwhile, in Russia, the Central Bank maintained its key interest rate at 21.00%, consistent with market expectations, marking the third consecutive time the rate has remained unchanged.
Globally, capital markets displayed widespread losses attributed primarily to Triple Witching. The Japanese Nikkei index reported a minor decline of 0.20%, while the Hong Kong Hang Seng index fell by 2.19%. The Shanghai CSI 300 suffered a 1.52% drop, marking its largest loss since late February 2025.
European indices mirrored these trends, with the STOXX 600 recording a loss of 0.81%. The German DAX dropped by 0.76%, and the French CAC 40 lost 0.65%. The UK’s FTSE 100 also faced challenges, down by 0.54%. Market activity in London surged, with trading volumes reported at 90.6% above the daily average, indicating heightened investor activity.
In the United States, major indices continued to decline, with the Dow Jones recording a 0.40% drop, the Nasdaq Composite down 0.50%, and the S&P 500 down 0.39%. Commodities also felt the heat, as gold prices fell by 0.31%, trading at $3,035.14 per ounce, though it managed a weekly gain of 1.72%.
In Mexico, the indicators reflecting the Manufacturing, Maquiladora, and Export Services Program (IMMEX) for January 2025 revealed concerning trends. The employment in these establishments decreased by 0.10% monthly and 0.69% annually, marking 13 consecutive months of declines. Furthermore, total hours worked fell by 0.25% monthly and 1.02% annually.
Real wages in Mexico saw a 0.39% monthly decline, despite a 5.57% annual increase largely attributed to the minimum wage hike. Importantly, the U.S. tariffs introduced on March 4, 2025—25% on imports that don't meet T-MEC regulations—pose a significant threat, with over half of Mexican exports at risk of not complying, which could lead to further job losses.
In response to these economic pressures, the Chamber of Deputies in Mexico approved a reform on March 20, 2025, to eliminate the National Institute of Transparency and Access to Information and replace it with a new body known as the Transparency for the People. This change raises concerns, as critical government financial information might be obscured, complicating the analysis of the nation’s public finances.
Experts predict that the exchange rate will fluctuate between 20.18 to 20.38 pesos per dollar throughout the trading day. Additionally, in the money and debt market, the U.S. 10-year Treasury note rate fell by 1.9 basis points to 4.21% on the same day.
To manage the risk of further depreciation, a call option priced at 1.11% premium offers an avenue for investors to hedge against the peso falling beyond 21 pesos per dollar.
As pressures mount both locally and globally, the Mexican financial landscape remains precarious as investors weigh their positions amid shifting market dynamics.
The upcoming week holds significance as the emerging economic trends develop further, influencing investor sentiment and financial decisions across the board.
