Peso suffers the biggest drop since the first half of 2020

In the first half of 2024, the Mexican currency recorded a depreciation of 7.78 percent or 1.32 pesos against the U.S. dollar in its spot market operations, due to increased risk aversion, based on figures from the Bank of Mexico.

This is the largest decline recorded since the first half of 2020, where the peso depreciated 21.56 percent against the dollar as a result of the uncertainty generated by the pandemic.

Thus, from December 29, 2023, to June 28 of this year, the exchange rate went from 16.9666 to 18.2862 pesos per dollar, with a minimum quotation of 16.4069 and a maximum of 18.7597 units per unit.

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It is worth mentioning that the dollar has strengthened against most of its major counterparts, given the expectation that the Federal Reserve will maintain a restrictive monetary stance for several months.

Additionally, analysts foresee continued volatility in the peso/dollar exchange rate ahead of the U.S. presidential elections to be held in November, as it is expected that Mexico will be used in the speeches between the candidates.

In fact, based on the latest Citibanamex Survey of Expectations, specialists increased their exchange rate estimate for the end of this year to 18.70 from 18.00 pesos per dollar, the highest level in the last nine fortnights.

It is important to remember that, in years of U.S. elections, the Mexican peso has depreciated an average of 6.63 percent, commented Gabriela Siller Pagaza, Director of Economic and Financial Analysis at Grupo Financiero Base.

Given the periods of high volatility observed in the exchange rate, Victoria Rodríguez Ceja, Governor of Banxico, has said there are tools available to restore the market, such as dollar auctions.