The Mexican peso fell to its historic lows against the US dollar on Monday, with the coronavirus –inspired economic crisis sending both the bond and stock markets on a tailspin.
The government’s reluctance to impose stringent social distancing measures is also stoking fears among investors that the worst days could be just around the corner.
It is the first time that one US dollar will fetch more than 25 pesos. Analysts say peso may fall lower, pointing to the decreasing demand for oil, one of the main commodities that Mexico exports.
It is a common phenomenon that whenever a crisis hits the economy, investors sell risky assets and try hiding behind safe-haven assets like the US sovereign bonds. Therefore, stock markets across Latin America are tumbling, wiping out billions of dollars in share value.
The Mexican peso was one of the best-performing currencies until mid-February, prompting President López Obrador (AMLO) to tout its stability as evidence of his economic management. But, it is falling continuously in the past 16 sessions, as the fear over coronavirus started to wreak havoc in the global financial markets.
With the Mexican economy teetering on the brink of a recession, analysts say AMLO has fewer weapons at his disposal to rescue the currency from falling further.
The lower value for the currency is not bad for all. It creates an opportunity for the sectors to export goods or services.