By Karin Strohecker and Noe Torres
LONDON/MEXICO CITY (Reuters) -Mexico’s peso touched its weakest degree in over two years on Wednesday as Donald Trump emerged victorious within the U.S. presidential election, extending a streak of volatility and weak spot for the rising markets bellwether forex.
The peso dropped in early buying and selling as little as 20.8100 per greenback for the primary time since August 2022, greater than 3% beneath its earlier shut and the most important such tumble since Mexico’s election in the summertime roiled home property.
It then retraced a few of its losses to hover at 20.6170 to the greenback by 0928 ET, down 2.59%.
Whereas rising market currencies suffered broadly towards a hovering greenback, the peso chalked up among the largest losses.
“The Mexican peso has been hit hard,” mentioned Chris Turner, international head of markets at ING, including he wouldn’t rule out a transfer to 22.00 to the greenback over coming weeks.
However Rodolfo Ramos, head of Mexico analysis at Brazilian financial institution Bradesco, mentioned a Trump administration was not an unknown and this was now “an attractive entry point” for traders.
“Mexico has already worked with him successfully,” he mentioned in a word to shoppers. “We see uncertainty on tariffs in the short term, but we remain positive on nearshoring over the medium and long run.”
After Trump’s 2016 presidential victory, the peso plummeted round 8.5% on the greenback to a then-historic low.
Markets are fretting that the USA’ southern neighbour might face commerce obstacles underneath a Trump presidency.
Mexican President Claudia Sheinbaum talked up the sturdy relationship, nonetheless. “There’ll be a good relationship with the U.S., I’m convinced of this,” she mentioned at a daily information briefing. “There’s no reason to worry.”
TRADE PACT
Turner mentioned 2025 could possibly be a “rough year for the peso” if Trump had been to query the renewal of the USMCA at its evaluation in 2026. America-Mexico-Canada Settlement – a commerce pact that took impact in 2020 – is up for evaluation in 2026.
“…Tariffs would be back in play under Trump 2.0 and Mexico is set to face negative pressure amid noise on USMCA renegotiations plus additional tariffs,” Citi’s Luis Costa mentioned in a word to shoppers.
The Wall Avenue financial institution mentioned it had placed on a brief place of the Mexican peso vs the South African rand, anticipating the Latin American forex to weaken in that pairing.
Immigration from Mexico to the U.S. in addition to remittances are anticipated to be different flash factors underneath a Trump presidency.
Traders must also be careful for potential central financial institution interventions in rising markets, mentioned Costa. Banxico mentioned it might intervene within the case of extremely dysfunctional markets.
Mexico’s forex has weakened greater than 17% this 12 months, considered one of prime 5 worst performing rising market currencies in 2024. A lot of that transfer has occurred since Sheinbaum’s landslide victory in June.
Sheinbaum is ready to current her first finances on Nov. 15. Citi economists anticipate a 5% deficit for 2025.
