Photographer: Susana Gonzalez/Bloomberg

Mexico's Peso Snubs Trump Talk in Return to Pre-Election Levels

  • Peso strenghtens to 18.29, not seen since before Trump win
  • Defeat of left-wing candidate in Mexico state fuels rally

Mexico’s currency has rallied to levels not seen since before Donald Trump won the U.S. presidency following a divisive campaign where anti-Mexico rhetoric rose to the forefront.

The peso is leading gains this year among the world’s most-traded and emerging-market currencies. First, relief came when White House officials spoke of a "sensible" Nafta renegotiation to benefit both countries. A series of rate hikes by Mexico’s central bank aimed at boosting the currency added to the rally. Then, the ruling PRI party’s victory in local elections last weekend drove a 2.3 percent rise against the dollar this week, hitting 18.29, a level not seen since early November.

Nafta renegotiations are expected to come to a close in early 2018, but markets are already pricing the currency as if Trump had never been elected. For Credit Suisse strategist Alvise Marino, who sees the currency weakening to 20.38 per dollar by year end, the Nafta-related risks could resurge and unwind the rally.

"Volatility is still high," Marino said by email. "That tells me that markets are still aware of Mexico’s risks."

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