LONDON (Reuters) -Mexico’s peso sank to its weakest stage in over two years on Wednesday, as markets braced for a win for Donald Trump within the U.S. election, extending a streak of volatility and weak spot for the rising markets bellwether foreign money.
The peso dropped in early buying and selling as little as 20.8038 per greenback for the primary time since August 2022, greater than 3% weaker than its earlier shut – the largest such tumble since Mexico’s election in summer season roiled home property. It then retraced a few of its losses to hover at 20.6260 to the greenback.
Whereas rising market currencies suffered broadly in opposition to a hovering greenback, the peso chalked up a few of the greatest losses.
“The Mexican peso has been hit onerous,” mentioned Chris Turner, international head of markets at ING.
“Excessive volatility can be undermining the carry commerce and it’s onerous to rule out a transfer to 22.00 over coming weeks.”
After Trump’s 2016 presidential victory, the peso plummeted round 8.5% on the greenback to a then-historic low.
The U.S. foreign money’s climb started after early indications of a Republican win in Georgia and continued to collect tempo with the hitting a four-month peak.
Markets had been fretting that america’ southern neighbour might face commerce boundaries beneath a Trump presidency.
Turner mentioned 2025 may very well be a “tough 12 months for the peso” if presumed president Trump would query the renewal of the USMCA at its assessment in 2026. The USA-Mexico-Canada Settlement – a commerce pact that took impact in 2020 – is up for assessment in 2026.
“No matter a crimson sweep or not, tariffs can be again in play beneath Trump 2.0 and Mexico is about to face unfavorable strain amid noise on USMCA renegotiations plus extra tariffs,” Citi’s Luis Costa mentioned in a word to purchasers.
The Wall Road financial institution additionally mentioned it had placed on a brief place of the Mexican peso vs the South African rand, anticipating the Latin American foreign money to weaken in that pairing.
Buyers must also be careful for attainable interventions by central banks in rising markets, mentioned Costa, flagging that Banxico mentioned it might intervene within the case of extremely dysfunctional markets.
Immigration from Mexico to the U.S. in addition to remittances are anticipated to be different flash factors beneath a Trump presidency.
Mexico’s foreign money has weakened greater than 17% this 12 months, which places it within the high 5 worst performing rising market currencies in 2024. A lot of that transfer has occurred within the wake of the nation’s presidential election through which Claudia Sheinbaum profitable a landslide victory.
