Mexico’s currency is poised to outperform the Canadian dollar as a drop in oil prices hits the loonie harder than the peso, according to Citigroup Inc.
Strategist Kenneth Lam reiterated his recommendation that traders short Canada’s dollar, saying Mexico’s peso will hold up better amid the bear market in oil prices and efforts by the Bank of Mexico to support the currency.
The peso has posted the biggest gain in emerging markets since July 29, the day before Mexico’s central bank said it would spend at least $8.6 billion to buy the local currency. It had dropped 20 percent against the U.S. dollar in the 12 months before policy makers announced the new effort.
Mexico’s currency rose 0.2 percent Tuesday to 12.2677 per Canadian dollar as of 8:30 a.m. in New York. Over the past year, the loonie has a 0.4 percent weekly correlation with crude, about four times the peso’s level. A reading of 1 would mean the assets are moving in lockstep, while minus 1 would mean they’re going in opposite directions.