Mexican Peso Eases Decline After Strong Reaction to Donald Trump’s Victory

The Mexican peso depreciated against the U.S. dollar midweek, amidst a volatile trading session reacting to the Republican Donald Trump’s election victory.

The exchange rate closed at 20.1660 pesos per dollar. Compared to the previous official close of 20.0788 pesos, according to data from the Bank of Mexico (Banxico), this marked a loss of 8.72 cents or 0.43%.

Earlier in the day, the dollar reached a peak not seen since August 2022, hitting 20.8088 pesos amid concerns over Trump’s win. It later fell to a session low of 20.0035 pesos per dollar before rebounding.

Traders, anticipating potential election impacts, drove the 10-year Treasury yield up to 4.48%, a level last seen in July. The U.S. Dollar Index (DXY) rose 1.62% to 105.09 points on the Intercontinental Exchange.

In line with projections, the peso depreciated as a reaction to Trump’s victory. Volatility could continue as markets digest the outcome. Traders are also awaiting results from the House of Representatives race, following the Republicans securing the Senate for Trump.

Throughout his campaign, Trump, as in his previous term, has targeted Mexico with criticism on trade and security issues. His proposals include imposing tariffs, renegotiating the USMCA, and designating drug trafficking in Mexico as terrorism.

There’s a lot of speculation, which explains the exchange rate’s initial reaction, even though it later eased. For now, we might consider this a market overreaction, and it’s worth noting that something similar happened during Trump’s first election.