Mexico’s peso, the best-performing currency this year, has begun to show weakness against the U.S. dollar as uncertainty looms over the outcome of the July 1 presidential election.
- The Mexican peso was down as much as 1.21% versus the dollar early Friday.
- The peso has been weakening this week amid Mexico’s heated presidential campaign, despite being one of the best-performing currencies against the dollar in 2018.
The Mexican peso fell further Friday April 20, threatening its place as the best-performing major currency against the US dollar this year, as political uncertainty around the country’s heated presidential campaign and NAFTA negotiations rolls on.
The currency was down 1.21% versus the US dollar at 10:34 a.m. ET Friday. On Wednesday, it plunged about 2% against the greenback to a three-week low.
The dropoff comes ahead of Mexico’s presidential debate this weekend.
Former Mexico City mayor Andres Manuel Lopez Obrador — a staunch leftist whose election could ratchet up tensions between the US and Mexico — recently widened his already double-digit lead in the race. A poll released Wednesday showed Lopez Obrador 22 points ahead of his nearest opponent, Ricardo Anaya.
Most peso forecasts have the currency weakening toward 19 pesos per dollar by the end of the second quarter — just in time for the July 1 election.
In Mexico, volatility is jumping for a very specific reason.
Spikes were less pronounced during recent elections, Ceja said in an interview. “But in 2012, the leader was Enrique Pena Nieto,” who was considered market-friendly.
Even if the peso drops as much as expected, Mexico’s economic outlook is strong enough that there may be a currency rebound, Wells Fargo strategist Erik Nelson said.
“We think there will be minimal changes to the overall policy framework in Mexico following the elections, and that Mexico’s fundamentals will remain fairly solid,” Nelson said in an interview. “With real interest rates in Mexico likely to remain attractive and given our expectation for USD weakness over time, we expect MXN to stage a moderate recovery.”
Sources: Business Insider, Bloomberg news agency
