The weakened Wednesday to fresh record lows against the U.S. dollar, crossing the psychologically key level of 22 pesos to the dollar as a Donald Trump news conference inflamed trade worries.
"Nothing that Trump has said made it any less likely that Mexico is in trouble. They've been dealt a bad hand," said Thierry Albert Wizman, global interest rates and currencies strategist at financial advisory firm Macquarie.
The president-elect "again talked about companies not leaving the U.S., staying here," Wizman said.
In Trump's first news conference since the election, the real estate mogul highlighted announcements in the last two weeks by automakers such as Ford Motor to expand production in the U.S. rather than Mexico.
"There will be a major border tax on these companies that are leaving [the U.S.] and getting away with murder," Trump said.
The dollar-peso hit 22.0320 during Trump's remarks, before coming slightly off those levels. Earlier, the Mexican currency had already reached record lows versus the greenback, as the peso extended Tuesday's more than 1.5 percent decline.
"We don't have any evidence of central bank intervention up there. It could be some profit-taking up there," said Carl Forcheski, director of corporate FX sales at French bank Societe Generale. He expects the dollar-peso to reach 23 in the first quarter of this year, before moderating to near 22.50.
Trump also said at Wednesday's news conference that building a border wall — and somehow making Mexico reimburse the U.S. for it — remains a priority. Mexican officials have repeatedly scoffed at the idea of paying for any barriers on their northern border.
"We're going to build a wall. I could wait about a year and a half until we finish our negotiations with Mexico, which will start immediately after we get to office, but I don't want to wait," Trump said. Vice President-elect "Mike Pence is leading an effort to get final approvals through various agencies and through Congress for the wall to begin."
Traders are concerned Trump's tough campaign talk against Mexico, including renegotiation of NAFTA, will become reality after his inauguration. And as the president-elect appears to discourage U.S. companies from investing in Mexico, the local economy will likely suffer.
The peso has fallen more than 5 percent against the dollar to start the year, and is off about 20 percent since the election. Meanwhile, the dollar index has hit 14-year highs, and U.S. stocks have rallied to records as markets bet on increased economic growth from tax reform, infrastructure spending and deregulation.
"There's still a lot of concern in markets about the U.S.-Mexico relationship going forward, a lot of concern about NAFTA," the North American Free Trade Agreement, Jason Leinwand, founder and CEO of currency trading advisory firm FirstLine FX, said of the peso's weakness ahead of the news conference.
Leinwand said weakness in the peso should continue despite the Mexican central bank's intervention efforts and expected interest rate hikes.