Peso and Other Global Currencies Could Weaken In Trump Presidency

Mexico’s national currency, the peso, could lose steam, to fall to a range of 21 to 23 against the US dollar if Republican presidential nominee Donald Trump wins the US Presidential election. This is according to mos of the economists who responded to a late September Bloomberg survey. On the other hand, if Democratic nominee Hillary Clinton wins the election, the currency could trade between 18 and 21.

“The market reaction has this takeaway that Trump’s campaign is struggling,” explains John Hardy, who is the head of foreign-exchange strategy at Saxo Bank. “The market has seized upon this as trading the Mexican peso as some kind of financial market proxy for the political outcome of the election.”

Hardy goes on to warn that it is still too early, of course, to draw any conclusions about the outcome of the election. Obviously, he makes reference to the surprise many traders experienced when Britain chose to leave the European Union.

In addition, City Index research director Kathleen Brooks, remarks “From a currency perspective, a Clinton win is the best outcome for the dollar and risk assets more generally, and the greenback is higher after her perceived triumph last night.”

Banco Bilbao Vicaya Argentaria SA analysts, including Alejandro Cuadrado, comment, “What looked primarily like an odd debate full of personal attacks coming from both candidates was seen with a friendly eye from markets as the latest polls show Hillary Clinton cementing her lead into [the Nov. 8 election]” adding that the peso appears cheap when you consider “EM demand, higher oil, carry and the swings in U.S. election expectations observed over the past six weeks.”
Now, Mexico’s exchange rate has already improved 5 percent since the first presidential debate (on September 26th), when polls showed that Clinton was gaining support but still largely undervalued when you look at the normal ratings throughout history.

In addition, The WSJ Dollar Index, which measures the U.S. currency against 16 international currencies, put the USD up by only 0.2%, to reach 87.57, showing the dollar up on the euro and the pound and the Japanese yen. However, the Canadian dollar pushed up nearly 1 percent on news that Trump could be elected.

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