Mexico's peso has lost 2.4 percent of its value against the dollar since the start of the year on President Donald Trump's protectionist approach. The new American president signed off orders this week to build a wall on the border between the two countries. On Thursday, the floating of an idea by Trump's team to tax Mexican products to pay for the wall caused another major move lower for the peso. The currency was trading at 21.2378 against the dollar at around 11.00 a.m. London time on Friday morning.
The relationship between Mexico and the U.S. has significantly deteriorated since the election of Donald Trump. President Enrique Pena Nieto of Mexico cancelled a trip to the U.S. next week as Trump intensifies his threats that the Mexican government has to pay for the border wall.
Trump has also promised to renegotiate NAFTA – a trade agreement between the U.S., Canada and Mexico, although Nomura analysts suggested that this threat "is unlikely to fully materialize."
"This is the challenge we face now in this world with politics and twitter politics," Dominic Bunning, forex strategist at HSBC, told CNBC on Friday.
"There's no real set policy in the U.S. so the markets are trying to react, are trying to price in where the peso should trade in this environment, should it price in a full 20 percent tax, maybe it should price in just a 10 percent tax, we just don't know," Bunning said.