The Mexican peso fell sharply to over 20 per US dollar late Sunday as global markets were shaken by recession fears in the United States. Bloomberg data revealed that the peso dropped to 20.16 against the dollar shortly after 10 p.m. Mexico City time.
The decline was partly attributed to a global unwinding of carry trades, a trading strategy where investors borrow at low interest rates to invest in higher-yielding assets. Bloomberg noted that this strategy’s reversal led to the yen and yuan strengthening while the peso continued its slide. The Mexican peso had previously depreciated to above 19 per dollar on Friday, driven by a slowdown in US hiring and weak manufacturing data for July, which fueled concerns about a potential economic slowdown in the US.
Janneth Quiroz, director of economic analysis at Monex, pointed out that reduced employment and lower manufacturing activity in the US were heightening fears of a deeper economic downturn. Such a slowdown could negatively impact Mexico’s economy by decreasing dollar inflows through lower exports, remittances, and foreign direct investment.
The New York Times reported a global market panic, with sharp declines in stocks worldwide as investors reacted to signs of a weakening US economy. The peso’s year has been notably volatile. It started 2024 at just above 17 per dollar, reached a peak of 16.30 in early April—its strongest position in nearly nine years—and then weakened following the June 2 elections in Mexico, where Claudia Sheinbaum and the Morena party secured major victories. The peso fell to 18.99 per dollar shortly after the elections due to concerns about potential constitutional reforms proposed by the Morena-led coalition.
Despite a brief recovery to 17.6-17.7 per dollar in mid-July, the peso ended July at approximately 18.6 per dollar and has continued to weaken into August.
