MXN depreciated from 19.769 to 23.408 in the last month while on 20th March, Banxico cut its policy rate by 50 bps to 6.50%. Analysts at MUFG Bank expect the Mexican peso to keep under pressure.
Key quotes
“MXN has depreciated sharply in March amid concerns related to the outbreak of Covid-19 especially in Mexico and in the US, and also somewhat impacted by the drop of oil prices. These 2 factors triggered S&P decision to downgrade Mexican sovereign rating to BBB from BBB+ on the 26th March.”
“An increasing pace of dissemination of Coronavirus in Mexico has all the socio-economic implications (hike of unemployment rate) and it might lead to sharper-than-expected recession and further MXN weakening.”
“The US economy might show a sharp weakening, thus impacting directly Mexican economic situation and also contributing to MXN weakening at least until 2Q 2020.”
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