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Wednesday, July 6, 2022

Peso hits record low against U.S. dollar

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People stand outside an exchange house in Mexico City on Monday. Photo: AP
People stand outside an exchange house in Mexico City on Monday. Photo: AP

The Mexican peso fell to a new low against the U.S. dollar today.  

The beleaguered currency is down by 0.93 percent at 19.873 per dollar as of 1:48 p.m. ET. It fell to as low as 19.6044 earlier, below the psychologically key level of 20.

The peso has tumbled much of this month, under-performing emerging-market currencies. More notably, the peso’s decline hasn’t triggered inflationary prices, as is often the consequence. The price of Mexican goods and services is relatively stable thanks to actions from the Central Bank of Mexico.

That’s good news not just for citizens whose income is in pesos, but for visitors and expats from the U.S.

“In general, this means that, as prices in Mexico stay almost untouched, the dollar gains a stronger buying power. So this is most likely a good moment for American tourists, importers and investors,” reported Fronteras.

The Trump theory

But how to explain the situation? Some connect it to Donald Trump’s poll numbers. 

“There is a definite correlation … the idea of Donald Trump’s wall and everything else is having an impact on Mexico’s peso,” Ihab Salib of Federated Investors told CNN.

The peso’s plunge is said to be a reflection of investors’ fears that the relationship between Mexico and the United States could be ruptured under a Trump victory this November.

But not everyone is on board with that theory.

“We’re still hesitant to go to the old ‘Trump Factor’ here but continued peso underperformance is hard to explain,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman, in a note published today in Yahoo News.

So far this year, the peso is down 12 percent against the dollar. Nearly a year ago, one dollar equaled about 16.5 pesos. As we publish this story, a dollar is worth 19.68 pesos.

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