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Mexican peso hits all-time low on potential Trump presidency
21-09-2016 13:59
Mexican peso hits all-time low on potential Trump presidency
Mexican peso hits all-time low on potential Trump presidency

According to experts, Mexico would be most affected in case Trump wins the US presidential election as the Mexican currency immediately falls on Trump’s improving poll numbers. The Mexican peso declined to an all-time low after US election polls showed Trump was gaining on Clinton. There is a negative correlation between the peso and Trump’s poll numbers: a rise in Trump's popularity makes Mexico's currency decline. The Mexican currency fell by 14% against the dollar in 2015 and so far this year it is down 10.5%. Thus, the Mexican peso is the worst performing emerging market currency after the Argentine peso. However, the currency’s deprecation last year was due to the oil price collapse, while this year it is associated with political reasons. It is no secret that Donald Trump rails against immigration. According to him, illegal immigrants are mostly involved in drug smuggling and other crimes. It is obvious that most of migrants coming to the United States cross the Mexican border. Recently, Trump met Mexico’s president and proposed building a border wall, and making Mexico pay for it. However, the fears are connected not with the cost of construction of the wall, but with the consequences for the Mexican economy. Moreover, the Mexican peso is also weighed by expectations of the Fed’s monetary policy decision. In case the US regulator raises rates, the dollar will strengthen, thus triggering a decline in the peso’s value as well as in other emerging market currencies. According to experts’ forecasts, the Mexican currency will reach the psychological barrier of 20 pesos per dollar in the near future.

 

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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