The coronavirus pandemic continues to take a heavy toll on the Mexican peso amid growing fears of a global recession.
The peso fell more than 4% to a record low of more than 23 to the United States dollar early Monday before recovering slightly.
In early international trading, the peso dropped to 23.07 to the U.S. dollar, a 4.1% slump compared to its closing on Friday. Just before 9:00 a.m., the currency had recovered to 22.74 to the dollar, a decline of 3.73% compared to Friday.
The fall in the value of the peso came after the United States Federal Reserve announced Sunday it would cut interest rates to 0% as part of measures to cushion the economic impact of the global spread of Covid-19, an infectious disease that originated in Wuhan, China, late last year and which has now spread to more than 140 countries including Mexico, where there were 53 confirmed cases as of Sunday.
“The United States definitely is expecting a very strong blow to the economy because of coronavirus. The signs are clear that a recession is getting closer,” Gabriela Siller, head of economic analysis at Mexican bank Banco Base, told the news agency Reuters.
The slump of the peso on Monday morning came after the currency lost 8.3% of its value against the U.S. dollar last week due to an oil price war between Saudi Arabia and Russia and the World Health Organization’s declaration that coronavirus is a pandemic.
Financial data and media company Bloomberg reported that last week’s losses amounted to the “biggest rout” for the peso since November 2016.
Bank of México Governor Alejandro Díaz de León said Friday that policymakers could sell dollars into the spot market to cushion the impact on the peso but added that foreign-exchange hedge auctions are preferred because they don’t deplete Mexico’s international reserves.
The central bank offered US $2 billion of foreign exchange hedges on Thursday, its first intervention since 2017.
However, Bloomberg reported on Monday that the Bank of México may need to do more to “calm markets and rein in excessive swings” in the value of the peso.