Who’s afraid of Donald Trump? Not Mexico. Not anymore.
The Mexican peso continued its extraordinary five-month rally, strengthening to fall below the 18.20 per dollar mark on Thursday for the first time since Donald Trump’s presidential victory in November.
The 0.3 per cent rise to 18.1633 takes the currency back above its pre-Trump election levels and also places the peso at a 10-month high.
The peso suffered a dramatic collapse in the wake of Mr Trump’s election victory, slumping to record low of 22.03 to the dollar in mid-January. But since then, the currency has been in fight-back mode as Mr Trump’s pre-election promises to tear up free trade agreements and build a wall on the US-Mexican border have taken a back seat. Mexico’s export-driven economy has also proved to be more resilient than expected.
Including Thursday’s gains, the peso is now up nearly 14 per cent since the start of 2017, making it the best-performing currency against the greenback this year.
This week has been a particularly good one for the peso. The currency got a boost at the start of the week after PRI party candidate Alfredo del Mazo Maza edged out a win against more populist candidates for governor in the important state of Mexico. PRI is the party of Enrique Peno Nieto, Mexico’s president.
Then came the sugar deal. News that Mexico will sharply limit the volume of refined sugar it will export to the US further assuaged concerns about a potentially damaging trade war between the two countries. It was seen as a positive step ahead of the renegotiation of the North American Free Trade Agreement this summer.
The peso has also benefited from broader weakness in the dollar. The DXY index — a measure of the buck against a weighted basket of peers — touched an eight-month low of 91.511 as growing uncertainty over the strength of the economy and Trump’s ability to push through his proposed stimulus measures and tax reforms fuel doubts about the pace of Federal Reserve interest rate increases.
Broader weakness in the dollar
rising as much as 0.3 per cent to hit 18.1633
highest since August 17, 2016 – 18.0366