Mexico Peso Trades in Line With Peers After Presidential Debate

Updated on
  • Currency has advanced as Trump has slipped in election polls
  • Trump has pledged to renegotiate Nafta agreement if elected

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Mexico’s peso traded in line with emerging-market peers after the third U.S. presidential debate, signaling traders saw nothing in the matchup that changed their perception of who is likely to win the election.

The currency slipped 0.5 percent to 18.6194 per dollar as of 11:09 a.m. in New York, paring gains of as much as 0.4 percent in the immediate aftermath of the debate. A gauge of emerging market currencies weakened 0.4 percent.

Mexico’s peso has reflected investor anxieties before this year’s U.S. election, often falling when Donald Trump’s campaign appears on the upswing and gaining when Hillary Clinton advances. In the third debate, the Republican candidate repeated his pledge to renegotiate the North American Free Trade Agreement if he’s elected. His recent struggles have been a boon for peso bulls: the currency is up about 7 percent since the first presidential debate in late September, the biggest gain among its major peers.

“With the polls so heavily in Clinton’s favor, markets are priced for her victory,” said Sean Callow, a senior strategist at Westpac Banking Corp. in Sydney. “There probably would only have been a sharp move in markets if Trump had performed extremely well, which wasn’t the case.”

Widening Lead

A CNN/ORC poll of debate watchers showed that 52 percent said Democratic contender Clinton won the exchange, compared with 39 percent for Trump. A Bloomberg Politics national survey Wednesday showed Clinton expanded her lead over her opponent.

At the start of their final face-to-face encounter, the two candidates offered sharply different views on the Supreme Court, gun control and abortion in a series of civil exchanges. The session quickly got personal and combative as it turned to accusations against Trump that he groped women and questions of whether he tolerated Russia’s interference in the U.S. election.

Trump refused to say he would accept the results of the Nov. 8 election if he loses, an extraordinary statement about one of the underpinnings of U.S. democracy that Clinton called “horrifying.”

‘Better Footing’

Mexico’s benchmark IPC stock index fell 0.4 percent. The country’s biggest stock ETF traded in the U.S., the $1.29 billion iShares MSCI Mexico Capped ETF, saw the highest inflows since March on Wednesday as investors poured in $99.1 million.

The peso posted the worst losses among major currencies last month as polls showed Trump gaining on Clinton, sparking investor concern that Mexico’s economy could be upended if trade with the U.S. is curbed and Trump follows through on pledges to deport millions of undocumented immigrants. In the week prior to the first debate, net short positions on the peso jumped to the highest in more than 20 years of data. Last week, bearish wagers dropped by the most in a year, according to the Commodity Futures Trading Commission.

After the first presidential debate, the peso posted the biggest gain among Bloomberg-tracked currencies as investors perceived Clinton as having outperformed her opponent. The currency started surging before the second televised debate had even started as traders priced in pleas by some Republican party members that Trump quit the race following the release of a 2005 video that shows the real-estate developer talking crudely about women.

Agustin Carstens, the governor of Mexico’s central bank, blames Trump’s comments for provoking volatility in the nation’s markets and said last month he thinks the peso is undervalued by “all measures.” He has said a Trump victory could result in a further rate hike, while “favorable” election results could help the peso appreciate and remove pressure to boost rates.

“There is still some risk premium in the peso from the U.S. election uncertainty,” said Jason Daw, Singapore-based head of emerging-market currency strategy at Societe Generale SA. The currency is set to strengthen toward 17.5 per dollar should Clinton win, he said.