The Mexican peso depreciated more sharply than its international peers on Wednesday due to a weak environment for risk assets and after comments from the CEO of Tesla, Elon Musk, on the possibility of not carrying out an announced investment in the country.
Musk said yesterday that it makes no sense to invest in Mexico if the Republican candidate for the US presidency, Donald Trump, returns to the White House and imposes heavy tariffs on vehicles produced in the Latin American nation.
The Mexican currency was trading at 18.3180 per dollar, down 0.98% from Tuesday’s Reuters reference price, in its second day of losses. Earlier it had weakened to 18.4330 units, a level not seen since July 2.
“The main driver that the Mexican market has followed has definitely been the Trump issue and his new tariff declarations for products made in Mexico, which have already had a significant impact.”Intercam Casa de Bolsa said in an analysis note.
“Although it is true that he is not yet president, the markets are predicting a probable negative scenario and we must be aware of what other impact(s) there may be,” he added.
Investors were also weighed down by lingering concerns over a controversial justice system reform expected to begin being discussed in August in a government-dominated Congress. Fitch Ratings said the reform could hurt the country’s business climate.
The concerns overshadowed growing expectations that the central bank would delay a long-awaited cut to the key interest rate from its current level of 11 percent after it learned inflation accelerated more than expected in the first half of July.
The benchmark S&P/BMV IPC stock index fell a marginal 0.07% to 53,668.63 points, although shortly before it had advanced 0.44% in an erratic market with its sights set on the second quarter corporate earnings season.
Shares of restaurant operator Alsea led the decline, down 3.71% to 58.99 pesos, after reporting a decline in quarterly profits the day before.
In the debt market, the yield on the 10-year bond rose two basis points to 10.02%, while the 20-year rate rose four, to 10.28%.
Source: Ambito
