Puerto Vallarta, Mexico – The Mexican peso experienced a significant depreciation in August, closing the month at approximately 19.71 pesos per U.S. dollar in international markets, marking a 5.97% decline or a loss of 1.11 pesos compared to its value in July. This drop marks the third consecutive month of decline for the peso, according to data from Bloomberg.
The peso’s depreciation has been largely attributed to internal factors that have heightened risk aversion among investors. These factors include the majority held by the ruling party, Morena, in Congress, and the recent approval of a controversial reform to the Judicial Branch. Economists have warned that these developments could lead to further upward pressure on the exchange rate in the coming months.
Gabriela Siller, director of economic analysis at the Base financial group, emphasized that the internal political landscape has been a significant driver of the peso’s weakness. “The current political environment, particularly the dominance of Morena in Congress and the Judicial Branch reform, has increased uncertainty, prompting investors to seek safer assets, which has negatively impacted the peso,” Siller explained.
As a result of these developments, the Mexican peso ended August as the most depreciated currency against the U.S. dollar globally. Other currencies that saw notable depreciations include the Russian ruble, which fell by 5.3%, the Turkish lira and Colombian peso, both down by 2.8%, the Argentine peso, which decreased by 2.2%, and the Peruvian sol, which declined by 0.54%.
Conversely, several currencies appreciated against the dollar in August. The Malaysian ringgit led the way with a 5.9% increase, followed by the Indonesian rupiah at 5.0%, the New Zealand dollar at 4.8%, the Swedish krona at 4.0%, and the Israeli shekel at 3.9%.
In domestic markets, the retail dollar closed August at 20.21 pesos for sale at CitiBanamex branches, representing a 5.81% increase or a rise of 1.11 pesos from its closing price in July.
The broader Mexican financial market also reflected the growing risk aversion, with the Price and Quotation Index (IPC) of the Mexican Stock Exchange (BMV) closing the month with a loss of 2.09%. This decline comes amid concerns over the Judicial Branch reform and its potential impact on the country’s economic stability. The IPC has now recorded losses in four of the last five months, leaving it 11.5% below its all-time high reached on February 7.
Among the hardest-hit issuers on the BMV were Industrias Peñoles, which saw a monthly decline of 13.3%, Liverpool with a drop of 13.0%, and Orbia, which fell by 11.9%. Other significant decliners included Banco del Bajío (-11.3%), Grupo Elektra (-10.9%), Qualitas (-8.1%), and Banregio (-7.7%).
As Mexico faces ongoing political and economic challenges, the outlook for the peso and the broader financial markets remains uncertain. Analysts warn that continued political instability and unfavorable economic reforms could further weaken investor confidence, potentially leading to additional depreciation of the peso and declines in the stock market in the coming month
Puerto Vallarta, Mexico - The Mexican peso experienced a significant depreciation in August, closing the month at approximately 19.71 pesos per U.S. dollar in international markets, marking a 5.97% decline or a loss of 1.11 pesos compared to its value in July. This drop marks the third consecutive month of decline for the peso, according to data from Bloomberg.
