The Mexican peso fell to a new record low against the United States dollar on Monday as the coronavirus pandemic continues to take a heavy toll on economies around the world.
One US dollar was selling at banks for as much as 25.52 pesos on Monday morning, Citibanamex reported. It is the first time ever that a greenback has cost more than 25 pesos.
The financial group Monex said that the peso is facing “considerable stress” due to the economic impact of Covid-19 around the world. As the pandemic worsens, investors have rushed to free themselves of high-risk currencies, such as the peso, in favor of the U.S. dollar, which is regarded as the ultimate safe-haven currency.
Monex said that “the slow reaction of the authorities” in Mexico, where “the virus outbreak has not yet emerged in a significant way” (there are currently 316 confirmed cases), increases the forecasts for an economic impact of “alarming magnitude that will continue to drag the peso down.”
The financial group Banco Base noted that the US dollar had strengthened against a basket of major currencies in overnight trading between Sunday and Monday.
Until mid-February, the Mexican peso had been one of the best performing emerging-market currencies in the world, and President López Obrador often touted its stability as evidence of his government’s sound economic management even as growth in Mexico stagnated.
But as Covid-19 spread to more and more countries and the number of cases began accumulating at a frighteningly fast pace, the peso began to waver.
The peso has weakened during each of the past 16 trading sessions, the news agency Reuters reported, making it the worst performing emerging-market currency in the period.
The price of Mexico’s export crude has also taken a significant hit in response to falling demand due to the coronavirus pandemic and a price war between Saudi Arabia and Russia, while last week was the worst the Mexican stock exchange has seen since 2008.
Amid the turmoil, the Bank of México cut its benchmark interest rate by 50 basis points on Friday to 6.5%.
The central bank said that the coronavirus pandemic would have a negative impact on growth prospects this year but did not announce a new forecast after cutting its outlook to 0.5-1.5% in late February.
However, Investment bank Credit Suisse and the Bank of America have both cut their forecasts for the Mexican economy in 2020. The former is predicting a 4% contraction this year while the latter anticipates that GDP will shrink by 4.5%.