Mexico peso drop makes currency experts cautious about future

Economy - Mohit Shah - Jan 28,2017

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mexico peso drop makes currency experts cautious about future

On Thursday, a further slump in Mexico peso has made market players cautious with new policies declared by Donald Trump administration leading to political uncertainty.

According to Nomura Holdings Inc., the Mexican peso can be viewed at 20-21 (per dollar) throughout the year, and there is a possibility of MXN trading at 25-28; however, there are too many uncertainties to have a strong belief about strong depreciation or appreciation.

The financial services company further added that, Mexico is indeed one of the emerging market countries which is most open the Trump administration’s protectionist policies.

Since the start of the year which brought President Donald Trump’s protectionist approach, the Mexico peso has lost it’s valued by 2.4 percent.

The new American president signed off instructions this week to build a wall on the border between the two nations. Moreover, the floating of an impression by Trump's team to tax Mexican goods to pay for the wall has developed another prime factor to lower the peso. On Friday morning, the currency was trading at 21.2378 against the dollar.

Since the election of Donald Trump, the relationship between the US and Mexico has deteriorated significantly. The matters have worsened President Enrique Pena Nieto cancelled a trip to the U.S. scheduled for next week as Trump deepens his threats that the Mexican government needs to pay for the border wall.

Amongst such uncertainty and fading of the U.S.-Mexican relationship, investors have stopped looking at Mexican credit as a safe option in the long term.  

Nathaniel Rosenbaum, credit strategist at Wells Fargo said, most investors until the election were quite long on Mexico credit and then clearly the election surprised many people, He further added that, “at this point I think investors are really questioning the being long on Mexico on the credit side”.