Mexican Peso Falls to Record Amid U.S. Presidential Debate Angst

The Mexican peso slid to a record as the close race between Democratic candidate Hillary Clinton and Republican Donald Trump fueled anxiety that Monday’s U.S. presidential debate will highlight protectionist sentiment that threatens to hurt the central American nation’s economy.

Traders have been piling up bearish positions as polls showed Clinton’s lead narrowing in recent weeks over Trump, who has pledged to renegotiate the two-decade-old Nafta trade accord that turned Mexico into an export powerhouse. The currency is the worst performing in emerging markets over the past month, and Citigroup Inc. warned in a note to clients that it will fall further if voter surveys show Trump gaining more ground after tonight’s debate.

“If he does well today and polls continue to go in his favor, that would probably mean a more depreciated peso,” said Carlos Capistran, the chief Mexico economist at Bank of America Corp. in Mexico City and the former director of macroeconomic analysis at Mexico’s central bank. “All of that is happening in the context of a Mexican economy that’s starting to look more vulnerable.”

Net short positions on the peso jumped 37 percent in the week ending Sept. 20 and are now the highest in more than 20 years of data, according to the Washington-based Commodity Futures Trading Commission. One-month implied volatility, a measure of the cost to protect against price swings, rose to 19 percent Monday, the highest in the world.

The peso weakened as much as 0.3 percent, touching a new record low of 19.9333 per dollar, before trading at 19.9008 at 10:02 a.m. in Tokyo. The currency has lost 6.6 percent in the past month.

With the first of three U.S. presidential debates scheduled for late Monday New York time, a Bloomberg poll showed Trump and Clinton were tied in a head-to-head contest, with each getting 46 percent of likely voters.

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