- ‘Trump Effect’ seen pushing peso lower as traders watch polls
- Currency has repeatedly weakened when Donald Trump gains
When Hillary Clinton coughs, the Mexican peso gets tuberculosis.
On a day when emerging market currencies were already reeling from falling commodities prices, the peso tumbled as much as 2.2 percent to an intraday record as the Democratic candidate’s slide in polls for the 2016 U.S. presidential race spooked traders. Among all the currencies tracked by Bloomberg, only the Suriname dollar has fallen more this week.
Traders already use the highly liquid Mexican peso as a proxy for betting on swings in emerging-market assets. Now, they’ve started using it to trade the U.S. election, too, according to Christian Lawrence, a rates and currency strategist at Rabobank NA in New York. Driving that trend is speculation that the U.S. Republican candidate, were he to triumph over Clinton in the November election, would move to restrict trade with Mexico.
“This is the Trump trade we’re seeing right before our eyes," Lawrence said. “Trump is rising in the polls and the Mexican peso is falling. If Trump wins, the Mexican peso is going to be the currency that’s worst hit.”
The currency fell 1.8 percent to 19.6931 per dollar as of 2:23 p.m. in New York, extending the week’s decline to 4 percent.
Clinton faced a backlash for saying half of Trump supporters were a “basket of deplorables” and amid renewed concerns about her health after a video showed her stumbling as she left a Sept. 11 ceremony with what her campaign later said was a bout of pneumonia.
A Bloomberg poll published on Wednesday showed Trump leading Clinton by five points in Ohio, a key battleground state. Further polls from Monmouth University and Fox News have shown Trump gaining ground in Nevada and nationwide among likely voters. Hillary Clinton is backed by 41 percent of likely voters and Donald Trump by 40 percent in a four-candidate race, according to the Fox poll published yesterday.
Mexico’s central bank has already surprised investors twice this year with two half-percentage point rate increases, one in February, after the peso had reached a then-record low, and the second in June after the currency slipped further. Concern Trump, if elected, will follow through on his promises to scrap the North American Free Trade Agreement and try to make Mexico pay for a $10 billion border wall has helped the peso weaken 12 percent this year.
“It’s getting slammed,” said Mike Moran, the head of economic research for the Americas at Standard Chartered Plc. “The Mexican peso has underperfomed the rest of the region for the last few days, and if you look at Trump’s move in the polls it’s a mirror image. A pertinent issue is how is Banxico going to react.”