Mexico’s Peso Surges to Two-Week High as Britons Vote on Brexit

  • Currency advances as much as 1.5%, most in Latin America
  • Correlation to British pound surged ahead of Thursday vote

Mexico’s peso surged to its strongest level in two weeks after two polls conducted before Thursday showed the campaign to keep Britain in the European Union was leading.

The currency advanced as much as 1.5 percent to 18.2220 per dollar, its strongest level since June 8. The peso’s 1 percent rise as of 9:12 a.m. in Mexico City was the biggest among major Latin American currencies tracked by Bloomberg.

The gains come after weeks of volatility as traders awaited Thursday’s ballot on the U.K.’s membership in the European Union. While the ties between Latin America’s second-biggest economy and the U.K. are limited, the peso’s status as the most-traded emerging-market currency means that traders often use it to hedge against global risks.

“It’s a relief rally as fear over the U.K. referendum evaporates,” Eduardo Suarez, a strategist at Bank of Nova Scotia in Mexico City, said in an e-mail.

Polling before Thursday has suggested the vote is finely balanced between the two camps, even as financial markets and betting odds indicated “Remain” is on course to win. The U.K. Treasury, the International Monetary Fund and others have warned that a so-called Brexit risked jobs, incomes, a plunge in the pound and damage to the U.K. economy.

On Thursday, the 120-day correlation between the pound and peso climbed to 0.42, more than double the level at the beginning of the year. A reading of 1 would mean that the currencies move in lockstep, while negative 1 would indicate they move in exact opposite directions.

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