The peso’s loss of value against the dollar is 19.26 percent between the week before the June elections and the last business day of August, making it the worst drop since March 2020, when the Covid-19 pandemic began.
The historical record of the official parity issued daily by the Bank of Mexico (Banxico) – of which there are slight variations in operations in formal international markets and local ones through regulated exchange houses – shows that the depreciation of the peso is the strongest in just over four years, when it fell by 27 percent.
On the last business day of August, last Friday, the exchange rate to settle obligations in Mexico with foreign currency, which Banxico sets according to money market conditions, was 19.81 pesos per dollar, as published in the Official Gazette of the Federation (DOF).
Based on this reference, the main local currency was offered for sale at 19.10 pesos and for purchase at 18.10 pesos at local exchange offices. The difference in value is due to the supply and demand of the currencies.
In the national and international markets, the Mexican peso began the day with an appreciation of 0.87 percent, or 17.2 cents. Its average price during the last business day of August in the basket of currencies was 19.67 pesos per dollar, with variations up to a maximum of 19.87 and a minimum of 19.62 pesos per dollar.
The appreciation of the currency did not make much difference with the accumulated fall since May 22, a key date in the “superpeso” phenomenon that had been notable in recent months, until the beginning of the period of strongest volatility that the national currency had suffered.
In that last week before the June 2 elections, the exchange rate reached its strongest level, with the dollar trading at 16.61 pesos; after the election day, on Monday, June 3, it began to fall, trading at 17.63 pesos per dollar.
Since then and until August, the peso remained fluctuating between 17 and 20 pesos per dollar in the markets, although the official reference rate published daily in the DOF was set, at its highest point, last Friday at 19.81 pesos per dollar.
From the pandemic to the ‘superweight’
The “superpeso” phenomenon began to be noticed between the end of 2022 and 2023, a time that coincides with the rise in remittances sent from the United States to Mexico by migrant compatriots who send resources to their families, as well as with the differential between the interest rates of both countries and the favorable perceptions of another economic phenomenon known as nearshoring or the relocation of companies that saw potential in the emerging Mexican economy.
The currency had experienced other movements since 2018, as on June 30, before the elections on the first Sunday of July of that year, it was trading at 19.86 pesos per dollar; after the electoral victory of Andrés Manuel López Obrador, it suffered a drop to 20.14 pesos per dollar.
During the transition months between the outgoing government of Enrique Peña Nieto, the currency remained stable, as it did throughout 2019 and the beginning of 2020, between 18 and 20 pesos per dollar in official reference rates and transactions on the exchange market.
On March 3, the Mexican currency began the day at 19.77 per dollar, when versions of the Covid-19 virus began to spread around the world and news of a pandemic began to emerge. Although the World Health Organization (WHO) had declared the disease an epidemic of international concern on January 30, it was not until March 11 that it was considered a pandemic and the first preventive recommendations arose, which included the paralysis of economic activities.
Starting on March 12, the Mexican peso began a downward spiral, most notably on March 25, when the dollar was trading at 25.11 pesos.
The accumulated depreciation in less than a month, from the beginning to the end of March 2020, was 27.01 percent, as a result of the announcement of possible closures of economic activities that, when materialized in the following months, brought widespread impacts on global supply chains and an inflationary era whose effects are still being felt.
By April 16 of that year, the strongest currency was trading at 24.11 pesos. As the effects of the great economic shutdown and the measures adopted by Mexico, where activities considered essential were kept open, began to be absorbed, the exchange rate began to appreciate.
As activities returned to normal in a new pandemic environment, with multiple safety and hygiene measures, by September 2020 the national currency had almost returned to its pre-pandemic level, trading at 20.96 pesos per dollar. The exchange rate remained stable for the rest of that year, as well as in 2021 and 2022, between 19 and 21 pesos per dollar. At the end of 2022 and with signs of certain increases in productive activities inside and outside the country, the revaluation was strengthened. It began the month of January 2023 at 19.47 pesos per dollar; February gained ground to 18.79 and on April 24 at 17.99 pesos per dollar, which marked a milestone in the exchange rate parity. On July 13 and August 2 of last year, it reached its highest value against the dollar, with each US unit trading at 16.85 pesos per dollar, which was one of the highest points of the “super peso” in 2023. Then came during the rest of that year and the first five months of 2024 a period of stability between 16 and 18 pesos per dollar in the markets and formal indicators.
Transition and volatility
By May 2024, at historic highs, the exchange rate was at 16.61 pesos per dollar, but when Claudia Sheinbaum won the Presidency of the Republic, it began to weaken in the face of the results of the elections for deputies and senators with a wide advantage that anticipated a qualified majority, which would give both the incoming and outgoing presidents the opportunity to make constitutional changes without negotiating with other political forces.
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