The Mexican peso weakened to as low as 17.08 to the US dollar on Tuesday morning, a depreciation of around 4.6% compared to the 16.30 level it reached just over a week ago.

Bloomberg data shows that the peso was trading at 17.08 to the greenback just before 9 a.m. Mexico City time before appreciating to reach 17.00 at midday.

The low point represented a depreciation of 2.1% compared to the peso’s closing position on Monday of 16.72 to the dollar.

Janneth Quiroz, director of analysis at the Monex financial group, said on the X social media platform that the peso was affected by “an increase in aversion to international risk.”

Investors are “nervous” as they await a response from Israel to the recent attack by Iran, she wrote.

The DXY index, which measures the value of the US dollar against a basket of foreign currencies, was up slightly at midday.

On Tuesday morning, investors were also waiting for further clues about the United States Federal Reserve’s monetary policy intentions ahead of a speech by the central bank’s Chair Jerome Powell.

Speaking at a policy forum, Powell noted that the U.S. economy was strong, but inflation hadn’t receded to the Fed’s 2% goal.

Until inflation shows progress in moving toward that target, “we can maintain the current level of restriction for as long as needed,” he said.

His remarks pointed to “the further unlikelihood that interest rate cuts [in the U.S.] are in the offing anytime soon,” CNBC reported.

The peso has benefited for an extended period from the broad gap between the Bank of Mexico’s key interest rate — currently 11% after a 25-basis-point cut last month — and that of the Fed, set at a range of 5.25%-5.5%.

The peso has also benefited from strong inflows of remittances and foreign investment. The currency began the year at just over 17 to the dollar before appreciating to reach its strongest position in almost nine years on April 8.

Gabriela Siller, director of economic analysis at Mexican bank Banco Base, noted on X on Friday morning that the USD:MXN exchange rate was once again above 17, adding that “with this, the peso erases its gain this year.”

With reports from El Financiero and Aristegui Noticias