Currency News: Trump’s Inauguration Lifts the Peso

Currency News

Following Donald Trump’s win, the Mexican Peso took a downward spiral. What was not expected was its turnaround. The Peso went from being the worst performer following Trumps win to the best after the inauguration. The day before Trump took office, the Peso rallied 10%, doubling the No.2 major currency.

peso trump

Source: Bloomberg

Initially the bounce was technical. The central bank signalled its willingness to sell foreign-exchange hedges worth billions of dollars to help the currency. However, the main driver has come from the Trump administration. Particularly comments from  the Treasury Secretary Steven Mnuchin. He mentioned a vision for trade that would benefit both the U.S and Mexico.

Mnuchin’s comments were seen as positive for the short-term in Mexico, as he toned down the hostility. According to a strategist from Credit Suisse Group AG, Alvise Marino, the likelihood of trade deals changing for the worse is high. He sees a gain in the Peso to 19 per dollar by mid-May before sinking to 22 by February next year.

Further, Alberto Ramos, the chief Latin America economist at Goldman and Sachs, believes that the longer it takes to take firm action on Mexican exports, the better it is for the Peso.

“As time goes by and nothing happens, it increases the probability that we move into a scenario where trade issues will be settled in a more compromising way rather than through aggressive unilateral action,” Ramos said.

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