Mexican Peso
Mexican Peso plummets after Trump won
The Mexican peso has been a proxy for Trump’s presidential hopes, but it took a huge beating after Trump was announced the new US presidential-elect. From the minute US polls closed, the peso began to slide, eventually nose-diving to a record low, as the global forex market took in the news of the US election in real time.
The currency dropped more than 12% against the US dollar, as investors began to wonder what would eventually happen to Mexico’s exports (i.e. cars, oil, etc.) during what is evidently a politically unstable climate, as most of them end up in the US through one means or another.
By the end of the day following the election, the peso did manage to claw back some of its value, to be …show more content…
only 8% down on the norm. The Mexican peso is used as a wide proxy for many Latin American and emerging-market investments that don’t have high levels of liquidity and thus are easy to hedge. This means that it usually gets punished the most during negative market sentiment, and it is the usual choice for anyone wanting to bet against emerging markets.
The issues with the currency have all come about through the political approach of President Elect Trump. The second largest economy in Latin America after Brazil is Mexico. This has been mentioned frequently in the election campaign headlines as Donald Trump has put forth his plans for constructing a wall along the southern border to cut off illegal immigrants, along with trade between the US and Mexico.
Even though the market was unprepared for a Trump victory, it was also aware of the risk.
Starting at the beginning of election of week, buying options on the Mexican peso became very expensive, which can be interpreted as the market’s uncertainty over the election outcome.
On the other side, traders and investors were thoroughly unprepared for the result, and this led to the peso’s rout. Currency strategists in Deutsche Bank pointed out to investors that buying and selling ratios of the peso-dollar combination showed that the market appeared to be preparing for a Clinton victory, but were very exposed if Trump won the election.
The Mexican peso is the most traded currency in emerging markets and reacted positively to poll results when Clinton was leading and negative when Trump began to lead. Even in less volatile market conditions, the peso has struggled against the dollar. Mexico’s currency is correlated to its oil exports and has been slowly decreasing since the price of oil has started to slide in 2014.
What’s clear is that the Mexican Peso is in for a rough ride, as President Elect Trump is set to create major issues with its host nation. For the best part of 12 months he has targeted Mexico and other South American nations, with the currency now feeling the
brunt.
The Mexican peso has been a proxy for Trump’s presidential hopes, but it took a huge beating after Trump was announced the new US presidential-elect. From the minute US polls closed, the peso began to slide, eventually nose-diving to a record low, as the global forex market took in the news of the US election in real time.
The currency dropped more than 12% against the US dollar, as investors began to wonder what would eventually happen to Mexico’s exports (i.e. cars, oil, etc.) during what is evidently a politically unstable climate, as most of them end up in the US through one means or another.
By the end of the day following the election, the peso did manage to claw back some of its value, to be …show more content…
only 8% down on the norm. The Mexican peso is used as a wide proxy for many Latin American and emerging-market investments that don’t have high levels of liquidity and thus are easy to hedge. This means that it usually gets punished the most during negative market sentiment, and it is the usual choice for anyone wanting to bet against emerging markets.
The issues with the currency have all come about through the political approach of President Elect Trump. The second largest economy in Latin America after Brazil is Mexico. This has been mentioned frequently in the election campaign headlines as Donald Trump has put forth his plans for constructing a wall along the southern border to cut off illegal immigrants, along with trade between the US and Mexico.
Even though the market was unprepared for a Trump victory, it was also aware of the risk.
Starting at the beginning of election of week, buying options on the Mexican peso became very expensive, which can be interpreted as the market’s uncertainty over the election outcome.
On the other side, traders and investors were thoroughly unprepared for the result, and this led to the peso’s rout. Currency strategists in Deutsche Bank pointed out to investors that buying and selling ratios of the peso-dollar combination showed that the market appeared to be preparing for a Clinton victory, but were very exposed if Trump won the election.
The Mexican peso is the most traded currency in emerging markets and reacted positively to poll results when Clinton was leading and negative when Trump began to lead. Even in less volatile market conditions, the peso has struggled against the dollar. Mexico’s currency is correlated to its oil exports and has been slowly decreasing since the price of oil has started to slide in 2014.
What’s clear is that the Mexican Peso is in for a rough ride, as President Elect Trump is set to create major issues with its host nation. For the best part of 12 months he has targeted Mexico and other South American nations, with the currency now feeling the
brunt.