The Mexican peso depreciated against the US dollar on Tuesday to close above 20 to the greenback for a second consecutive day.
The USD:MXN rate at the close of trading was 20.08, according to the Bank of Mexico.
The peso depreciated around 0.25% on Tuesday after closing at 20.03 to the dollar on Monday. It was the third consecutive trading day that the peso lost ground.
Next Tuesday’s presidential election in the United States is one factor causing the currency to decline.
Polls continue to show an extremely close race, but there are “growing bets” that former U.S. president and Republican Party candidate Donald Trump will win, the El Economista newspaper reported.
Trump has threatened to impose hefty tariffs on vehicles made in Mexico if he defeats Democratic Party candidate and U.S. Vice President Kamala Harris next Tuesday.
Mexican bank Banco Base said Tuesday that there is “market nervousness” due to Trump’s “protectionist posture.”
Trump, the bank added, is not only threatening to impose tariffs on Mexican imports but also renegotiate the USMCA and classify Mexican organized crime groups as terrorists. The former president said in 2019 that the U.S. would designate Mexican drug cartels as terrorist organizations, but a federal designation never eventuated.
Beyond the U.S. election and Trump’s tariff threats, a number of other factors have recently influenced the peso’s depreciation.
They include the recently enacted judicial reform and slowing economic growth in Mexico.
There are concerns that the judicial reform – which allows all judges to be directly elected by Mexican citizens – could cause a decline in direct foreign investment in Mexico.
There are also concerns about other constitutional reform proposals, including one that seeks to disband a number of autonomous government agencies.
The new Congress has already approved a number of constitutional reforms since recently elected lawmakers assumed their positions on Sept. 1, and is expected to approve others given that the ruling Morena party and its allies have strong majorities in both the lower house and the Senate.
Since the comprehensive victories of President Claudia Sheinbaum and Morena at the June 2 elections, the peso has depreciated more than 15%.
The Friday before the elections were held, the currency closed at 17.01 to the dollar. It reached an almost nine-year high of 16.30 to the greenback in April.
With reports from El EconomistaÂ
