Mexico's peso edges higher in another day of volatile trading

By Libby George

LONDON, March 5 (Reuters) - Mexico's peso edged higher on Wednesday, regaining more of the tariff-driven losses that had pushed the currency close to its lowest since mid-2022.

The peso clawed back to 20.55 by 1205 GMT, roughly 0.4% stronger versus the dollar on the day and edging back to the levels seen late last week.

U.S. President Donald Trump imposed 25% tariffs on most imports from Mexico and Canada on Tuesday, roiling markets in which many expected another 11th-hour compromise.

The peso ended the trading day on Tuesday stronger by the end of the session after U.S. Commerce Secretary Howard Lutnick told Fox Business that President Donald Trump will reach a middle ground with Canada and Mexico on tariffs and an announcement to that effect was expected on Wednesday.

"The peso is now back at 20.50, which seems like this magic line where dollar / peso is converting back to no matter what is happening," said Michael Pfister at Commerzbank.

The peso could be stuck longer at the level of 21 to the dollar that it tested yesterday if tariffs were implemented permanently, said Pfister.

"The market is now a bit more sceptical that high tariffs will be in place, given that the U.S. economy is somewhat slowing," Pfister said.

The U.S. dollar index also eased 0.4% on Wednesday, bringing its three-day losses to 2.23%, the most in this timeframe since late 2022.

"The new tariffs on Mexico may not become a permanent feature of US trade policy, though how long they would last is uncertain," Goldman Sachs economist Alberto Ramos said in a note published on Tuesday.