While correlation is not causation, it is certainly a wink and a nudge in this case. As Donald Trump’s poll numbers soar so the Mexican Peso has been collapsing against the U.S. dollar, andjust broke to fresh record lows [as illustrated in the chart below].
After last year’s annus horribilis that saw the currency shed more than 14% of its value against the dollar, the peso is down an additional 10.5% so far this year – making it the world’s second worst performing major emerging market currency after the Argentine peso.
“Low oil prices have hobbled Mexican president Enrique Peña Nieto’s efforts to open up the country’s energy sector to private investments and forced the government to cut spending and growth forecasts. In addition Mr Peña Nieto has seen his approval ratings sunk to record lows amid anger over his handling of corruption scandals and perceived inability to maintain law and order in Latin America’s second most important economy. Meanwhile, uncertainty over the timing of the next U.S. interest rate rise and Mr. Trump’s recent recovery in the opinion polls against Hillary Clinton have further sapped enthusiasm for Mexican assets.”
Combined together, analysts say this means it’s no longer a question of when the peso will breach the once unheard of level of 20 to the dollar. It’s when.
[The above is seconded by Marc Chandler (marctomarket.com) who, in an excerpt from an article on emigration from Mexico states that]
“a number of market participants continue to see the U.S. presidential election as a factor that is influencing the vagaries of the Mexican peso.
The recent slide in the peso (the U.S. dollar has risen from ~MXN18.26 in the middle of last week to MXN19.20) has coincided with the pullback in oil prices, higher yields, and a little firmer Trump poll numbers.
Nate Silver’s Fivethirtyeight.com indicates that based on current polls, the odds of Clinton becoming the next U.S. President is about 69%. A month ago, it was around 88%.
The U.S. dollar appears to be finding support around the previous resistance at MXN19.00.”
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