Mexico's peso faces an "adverse environment" in 2018 due to US tax reforms, uncertainty over a key trade pact and elections in July, central bank governor Alejandro Diaz de Leon said today.
"We have been pointing out that the external and internal environment is adverse, but we have also highlighted that the country's macroeconomic strength is very noteworthy," Diaz de Leon said.
The peso hit a nearly 10-month low yesterday despite the Banco de Mexico's move to raise the amount to be auctioned in its currency hedging programme aimed at propping up the local currency.
"The objective (of raising the amount to be auctioned) has no message about the level of the exchange rate but only to provide more favorable conditions in terms of liquidity and depth," said Díaz de Leon.
Last week, the US approved a massive $1.5 trillion tax overhaul that slashes the corporate rate and reduces taxes for many individuals as well, which has prompted fears that investment in Mexico could slow.
Uncertainty over the ongoing renegotiation of the North American Free Trade Agreement (NAFTA) is also seen as a factor weighing on the peso.
