The Mexican peso fell to more than 22 to the United States dollar early Monday after a sharp decline in global oil prices.

A single greenback was buying 22.13 pesos just before 5:00 a.m., according to financial data and media company Bloomberg. However, the peso recovered to 21.16 to the dollar by 9:00 a.m.

In banks, the U.S. dollar was selling at 21.45 pesos this morning, according to data from Citibanamex.

The decline in the value of the peso to a four-year low came after crude prices in Asian markets fell by as much as 31%, the biggest slide since the Gulf War in the early 1990s. The Brent Crude price, one of the two main benchmark prices for oil purchases, fell 18.6% this morning, while the West Texas Intermediate price, the other main benchmark, dropped 16.8%.

The decline in crude prices came after Saudi Arabia launched a price war with Russia. The Middle East kingdom, the world’s second largest oil producer after the United States, slashed its prices and established plans to ramp up production after Russia refused to make a further large cut to its output in order to stabilize markets.

Lower oil demand due to the global spread of Covid-19, the novel coronavirus that originated in Wuhan, China, late last year, has also had an impact on oil prices.

The Saudi price cut – the biggest in the last 20 years – led investors to worry about the impact on Pemex, Mexico’s heavily-indebted state oil company.

Speaking at his morning press conference on Monday, President López Obrador acknowledged the decline in the value of the peso but expressed confidence that the currency would recover.

“We had a problem yesterday because there was … a fall in oil prices and the peso depreciated but we think that we’re going to recover,” he said.

“I’m optimistic, firstly, because we have healthy public finances, we have good reserves and we don’t have a deficit – missing amounts – in our collection of taxes,” López Obrador said.

“[There are] good signs in terms of economic growth, we already stopped the fall in oil production. If we hadn’t achieved that, it would have hit us hard but we’re producing more and [there is] a trend … [toward] more production.”

The president added that his administration has been closely monitoring oil prices and their effect on the peso and that it expects that things will return to normal, and that Mexico will have “economic and financial stability.“

Source: El Financiero (sp), Reuters (en)