Puerto Vallarta, Mexico – The Mexican peso opened the week with a sharp decline against the US dollar, driven by heightened risk aversion in global markets and renewed concerns over former US President Donald Trump’s tariff policies. The currency’s depreciation was exacerbated by tensions between Colombia and the United States, which reignited fears of trade disruptions in the region.
The peso closed the day at 20.7278 units per dollar, marking a significant drop from Friday’s closing price of 20.2856 pesos, according to data from the Bank of Mexico (Banxico). This represents a daily loss of 44.22 cents, or 2.18%, the peso’s steepest decline since the volatility seen after Mexico’s recent elections. The dollar traded within a wide range, hitting a high of 20.7509 pesos and a low of 20.3697 pesos during the session.
The Emerging Market Currency Index, which tracks the performance of emerging market currencies against the dollar, fell by 0.32%, with the Mexican peso leading the decline. Analysts attributed the peso’s weakness to a broader risk-off sentiment in global markets, fueled by geopolitical tensions and uncertainty surrounding US trade policies.
Risk Aversion and Trump’s Tariff Threats
The immediate trigger for the peso’s decline was a diplomatic spat between Colombia and the United States. Colombian President Gustavo Petro’s refusal to allow a US military plane carrying deported migrants to land in the country prompted Donald Trump to threaten tariffs and other punitive measures against Colombia. In response, Colombia announced a 50% tariff on certain US goods.
Although the two nations later reached an agreement, avoiding the implementation of these measures, the incident revived concerns about Trump’s potential return to protectionist trade policies. This uncertainty weighed heavily on the Mexican peso, erasing the gains it had made the previous week.
“Trump’s message is not just for Colombia but for all countries, particularly in Latin America and Europe,” said CIBanco in a statement. “He made his threats credible without incurring a high cost for the United States. Countries that align with his policies can expect favorable treatment, while others may face tariffs and other measures.”
Financial consultant Juan Carlos Cruz Tapia echoed these sentiments, noting, “This has revived expectations and nervousness about the imposition of tariffs on Canada and Mexico starting in February. Emerging currencies have depreciated across the board, and Trump will continue to be the catalyst for market volatility.”
Technical Resistance and Market Outlook
Analysts highlighted that the peso’s weakening found technical resistance at 20.90 pesos per dollar. While surpassing this level is not the most likely scenario, there is a risk that the peso could breach this threshold, potentially pushing it toward the next resistance level at 21.20 pesos before any recovery.
This week, investors are closely watching key economic developments, including the Federal Reserve’s monetary policy announcement. The Fed is expected to keep interest rates unchanged, but any hints about future policy adjustments could impact the dollar’s strength. Domestically, Mexico’s fourth-quarter Gross Domestic Product (GDP) report will provide insights into the country’s economic performance, potentially influencing the peso’s trajectory.
Puerto Vallarta, Mexico - The Mexican peso opened the week with a sharp decline against the US dollar, driven by heightened risk aversion in global markets and renewed concerns over former US President Donald Trump’s tariff policies. The currency’s depreciation was exacerbated by tensions between Colombia and the United States, which reignited fears of trade disruptions in the region.
