Currency News: Mexican Peso – Bulls and Bears Battle in Uncertainty
Currency News
Wall Street analysts have been betting on the raise of the Mexican Peso for a while now. However, the currency’s top forecaster is not too excited about it.
After the peso sank 13 percent with Trump’s election, Juan Carlos Rodado, the head of research at Paris-based bank Natixis SA, is expecting more losses if Donald makes good on his protectionist pledges. Whether he does is anyone’s guess, but there’s certainly no reason to go long, says Rodado, who had the best track record in the second half among forecasters tracked by Bloomberg.
That stands in contrast to views from the likes of Goldman Sachs Group Inc., BNP Paribas SA and Mark Mobius, the executive chairman of Templeton Emerging Markets Group. All of them see gains for the peso, even if the tension escalates over a proposed border wall and trade measures. The idea is that the Mexico’s fundamentals are much stronger than the current price of the peso, therefore, it’s bound to have a market correction.
The bullish forecasts seemed all the more discordant Thursday as the peso reversed earlier gains and sank 1 percent to about 21.28 per dollar after President Enrique Pena Nieto canceled a meeting with the U.S. president planned for next week.
Trump twice sent the peso tumbling this year when he took to Twitter to celebrate Ford Motor Co.’s decision to not move operations to Mexico from the U.S. and when calling for a “border tax” for companies that produce in Mexico to export to the U.S. The automobile industry brings more foreign funds to Mexico than any other industry, while 80 percent of Mexico’s exports are sent to the U.S.
“The bigger risk to Mexico now is if U.S. will, in fact, apply trade barriers, such as 35 percent border tax,” Rodado said. Half of foreign direct investment to Mexico comes from the U.S., he pointed out.
“It’s very hard to have a one-directional view when it comes to the Mexican currency because there’s going to be a lot of noise,” he said.
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