Mexico Peso Forecast to Go From First to Worst Amid Trump Threat

  • Currency has led gains among world’s major currencies in 2017
  • Some analysts forecast a turnaround during second-quarter

The world’s top-performing major currency could be in for a swift reversal.

Mexico’s peso, which has surged this year on wagers the selloff that followed Donald Trump’s election victory was overdone, is projected to weaken 5.4 percent by the end of June. That’s the worst forecast among 43 currencies tracked by Bloomberg.

Analysts’ predictions clash with renewed confidence that Mexico’s world-leading carry trade remains intact and friendly comments from U.S. officials signaling Trump won’t seek a major overhaul of the North American Free Trade Agreement. But bears are focused on the risk that a selloff could come quickly should he announce a major crackdown on exports or make other comments that discourage investments in Mexico.

A victory by France’s far-right presidential candidate Marine Le Pen next month also threatens to drive a rapid peso depreciation, according to Christian Lawrence, a New York-based strategist at Cooperatieve Rabobank UA, who sees the peso trading at 22 per U.S. dollar by the end of the second-quarter.

"Any global risk will increase selling, and with this uncertainty over trade consistently looming, it would be a brave trader to take a long-term bullish position on MXN," he said. "There just isn’t a strong case to be made for significant MXN upside."

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— With assistance by Carlos Torres

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