The Mexican peso managed to recover and cut almost 50 cents against the dollar during the week despite suffering a drop after Donald Trump's tariff threat. Investors appeared more confident, considering that the dollar is overvalued and interest rates are high.
"The further we progress into President Trump's second term, I think investors will feel more comfortable expressing their opinions, which are: the dollar is expensive, interest rates are high, and both are ripe for a correction," mentioned a Morgan Stanley analyst on Bloomberg Television.
According to data from the Bank of Mexico (Banxico), the dollar depreciated by 2.36% in the first week of Trump as president, which equated to a loss of 49 cents. The Bloomberg Dollar Spot Index also closed with a 1.6% drop compared to the previous week, marking the largest weekly decline since November 2023.
Goldman Sachs warned of a potential risk in Trump's trade policy if it remained unchanged, which could reverse the dollar's gains. Currency analysts from MUFG were cautious and suggested that the dollar's decrease might be temporary due to reduced long positions.
Although Trump mentioned imposing taxes on products made outside the United States at the World Economic Forum in Davos, he has not yet signed any decrees regarding this. Regarding tariffs on China, the president suggested they might not materialize and ordered an analysis of U.S. trade policies, including the USMCA and trade deficits with partners.
Despite the "night of terror" experienced by the Mexican peso after the tariff threat, Trump has yet to implement any measures in this regard. For now, the Mexican currency managed to recover, demonstrating investor confidence amid the uncertainty generated by the Trump administration.
