The weakness in the Mexican peso looks like it will continue in 2017 as traders come to grips with potential changes in U.S. trade policy.
"The market is increasingly convinced Donald Trump wasn't kidding around about tackling Mexico and production in Mexico," said Adam Button, currency analyst at ForexLive.com.
The peso fell for a second straight day Wednesday to record lows against the U.S. dollar as traders worried about the negative impact of President-elect Donald Trump's policies on the Mexican economy.
"The key driver for the last two days is the news that Ford would not be investing in Mexico and there's concern GM" may not either, said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie.
"People were looking for investment in Mexico to be stronger this year, and now a lot of foreign direct investment can be taken away from Mexico without any legal" action," Wizman said.
The peso briefly traded more than 2 percent weaker against the U.S. dollar on Wednesday, hitting 21.619 and breaking past a previous record of 21.3952 set on Nov. 11, three days after the election. The move extended Tuesday's roughly 2 percent drop in the peso.
Trump has called for an overhaul of the North American Free Trade Agreement and building a wall on the U.S.-Mexico border. As a result, the was widely watched as a proxy on the election result during the presidential campaign.
Carl Forcheski, director, corporate FX sales, America, at Societe Generale, pointed out that after a postelection spike, the dollar-peso had traded in a range in December.
Then on Tuesday, the peso weakened after Ford Motor announced it will cancel production of a $1.6 billion plant in Mexico, and instead invest in Michigan. Trump had bashed the automaker for moving jobs outside the United States. Ford CEO Mark Fields said on CNBC's "Halftime Report" that the decision not to invest in Mexico was based on its forecast for demand.
Separately on Tuesday, Trump attacked General Motors with atweet for selling a Mexican-made Chevy Cruze in the United States. GM said it makes most of its Chevy Cruze models in the U.S. and only sells a "small number" of one Mexican-made model in the U.S.
The new year moves in the peso indicate to traders that further weakness is likely ahead.
Before the last two days, Wizman said he expected the dollar-peso to reach 21.5, but now he estimates the currency cross could move to 22 or 23 later this year.
Forcheski at Societe Generale forecasts the dollar-peso will reach 23 in the first quarter before ending the year around 22.