The Mexican peso has faced significant fluctuations recently, largely influenced by concerns over impending tariffs announced by U.S. President Donald Trump. Amid this turbulence, the peso depreciated against the U.S. dollar, particularly noticeable as the currency reached around 20.49 pesos per dollar on February 27, 2025, marking a decline of 0.37%, or 8 cents, compared to the previous day. This downward trend continued as it opened at 20.40 pesos on February 28, reflecting another depreciation of 0.46% during the trading session.
According to reports from Bloomberg, the dollar closed at 20.97 pesos at Banamex on February 27, which was 0.29% or 6 cents higher than the previous day's closure. The market's reaction to Trump's ominous tariff declarations has been stark, as his administration stated these tariffs on imports from Mexico would take effect starting March 4, creating unease among investors. "The peso has become the victim of Donald Trump's threats, who affirmed yesterday he would impose tariffs against Mexico and Canada from the first days of March," reported by Telediario.
The financial markets reacted accordingly, with the global risk aversion leading to the dollar strengthening by 0.61% across various exchanges. The major currencies saw significant losses, with the Polish zloty dropping 1.38%, the Chilean peso by 1.19%, and the New Zealand and Australian dollars also experiencing declines. This volatility has not only affected the peso but caused ripple effects throughout international markets, with key indices like the Dow Jones and S&P 500 registering losses as investors reacted to the increasing uncertainties.
On Thursday, February 27, the Mexican capital markets did not fare well either. The domestic stock index, known as the Índice de Precios y Cotizaciones (IPC), closed the session down by 1.29%, reflecting losses of several major companies. Grupo México faced the most significant drop, recording losses of 3.2%, followed closely by Cemex and Bimbo, which experienced declines of 2.5% and 4.9%, respectively. "The nervousness over possible tariffs triggered losses across the board, affecting both currencies and stocks," noted observers.
Many analysts from leading financial institutions are concerned about the peso's future performance, with predictions indicating it could deteriorate even more if Trump's policy approach continues to sour relations between the U.S. and Mexico. Gabriela Siller, the Economic Analysis Director at Banco Base, warned, "The peso might breach the 20.50 threshold if market conditions do not improve soon. We anticipate some fluctuations between this mark and 20.38 as the day progresses".
Meanwhile, on February 28, Banco de México (Banxico) set the exchange rate for dollar obligations at 20.4722 pesos. The interbank rate was slightly less favorable, reflecting the complex nature of the current financial climate.
Further complicate matters, financial institutions unveiled varied rates for dollar transactions on the morning of February 28. Banorte was offering the dollar at 19.40 pesos for buying and 20.90 for selling, whereas BBVA reported rates of 19.70 for buying and 20.84 for selling. At the same time, Afirme established their buy/sell rates at 19.50 and 21.10, respectively, showing how the spread between the buying and selling prices varies across different banks, highlighting inconsistencies amid the peso's fluctuational pattern.
Market participants continue to monitor developments closely, as the potential for conflict post-tariff announcements could create unpredictability for the peso. With mixed signals from government announcements and market reactions, the financial community remains on alert for any indications about the economic ramifications of the tariffs on the Mexican economy.
Overall, it is evident from recent trading days and analyst responses how heavily influenced the peso is by socio-economic dynamics and political decisions from Washington. The upcoming days are likely to reflect the swirling uncertainties concerning trade relations between the U.S. and Mexico as both governments navigate through these challenges.