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By KELIN DILLON

Following a disappointing economic report from the U.S. Federal Reserve and a global market crash now dubbed “Black Monday,” the U.S. dollar to Mexican peso exchange rate surpassed 20 pesos per dollar on the night of Sunday, Aug. 4, its lowest value since October 2022.

Experts signaled that a potential recession in the United States caused investors to sell off pesos in a “domino effect” away from assets deemed as risky.

“If this volatility continues, we could reach 21 pesos per dollar in the short term and later 21.67 pesos. Everything depends on how the economic news evolves,” Rankia Latam Chief Economist Humberto Calzada told daily Mexican newspaper El Financiero.

Likewise, Japan’s decision to cut its interest rates caused the peso to lose “great appeal as a currency used to carry trade,” said an analysis from Monex on Monday, Aug. 5.

However, the peso-to-dollar exchange rate stabilized in the mid-19s by Monday afternoon, though the peso still remains considerably weaker than it was against the dollar just a few months prior.

For his part, Mexican President Andrés Manuel López Obrador (AMLO) took to his daily morning press conference on Monday, Aug. 5, to acknowledge the “situation of instability” with the Mexican peso, though insisted that Mexico is capable of “holding on a little longer.”

“There was economic instability at the end of last week, on Thursday, a situation of instability that began from a figure that was given about the growth of unemployment in the United States and this made the financial markets nervous, it affected the exchange rate in the countries worldwide,” said the federal executive. “In the case of Mexico there was a loss on the peso, but not very significant.”

“We have a buffer, it doesn’t affect us that much because our finances are very strong, of course we are neighbors of the United States and there is economic integration and it affects all industries, but we can resist a little longer for two reasons; one, we have sufficient record reserves from the Bank of Mexico, we have never had so many reserves as now,” continued AMLO.

“And the other thing that helps Mexico is that throughout the six-year administration, the peso has appreciated and strengthened, what happened to us with former presidents has not happened to us, in all those governments the peso was devalued and in ours it has not been devalued, it is the first time in 50 years that our peso has not been devalued,” concluded López Obrador.