27.03.202519:27:19UTC+00Mexican Peso Weakens Amid Policy Easing and Trade Tensions

The Mexican peso depreciated beyond 20.3 per USD, slipping from a four-month peak of 19.9 in mid-March as investors analyzed the recent monetary policy adjustments amid ongoing trade tensions. The Central Bank of Mexico, known as Banxico, implemented a 50 basis point reduction in interest rates to 9.00%. Future cuts are expected if the trend of disinflation continues, diminishing the yield advantage that usually attracts carry trade investments. This policy of reducing rates is designed to stimulate economic growth given the noticeable domestic economic fragility, thereby reducing the interest rate gap with the US dollar. Additionally, President Trump's decision to impose a 25% tariff on imported automobiles and certain auto parts starting April 2nd has sparked concerns about the competitiveness of Mexico's export sector, especially the automotive industry. With exports stagnating month-over-month and declining by 2.9% annually, the pressures on foreign exchange earnings have increased, further exacerbating the peso's decline.