The Mexican peso dropped to a new low against the US dollar on Wednesday, in anticipation of the policies likely to be pursued under a Trump administration in the US.
MXN fell more than 2% against the USD, hitting 21.619, breaking the previous record low of 21.3952 that was set three days after Trump’s election victory on November 8.
As part of Trump’s election campaign, he has called for an overhaul of the North American Free Trade Agreement (NAFTA) and subsequently USD/MXN was often watched as a proxy on the election result during the presidential campaign and could be seen to fluctuate around the highly publicised presidential debates.
The market also appeared to start pricing in the protectionist policies that might be pursued once Trump is president, given that on Tuesday the peso weakened against the dollar after Ford Motor announced plans to shelve a $1.6 billion investment in Mexico and instead invest in a Michigan plant.
The same day, Trump took to Twitter to criticise General Motors for sending cars made in Mexico to the US tax free.
“General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!” said the president elect on Twitter.
The weakening of the peso on Tuesday was then exacerbated by the minutes released on Wednesday from the US Federal Reserve Bank’s meeting in December, in which the policy makers expressed concerns that quicker economic growth under Trump could necessitate faster rate hikes in the US, which would put the peso under further pressure in 2017.
How will policy makers in Mexico respond to this downward pressure on the peso? And how should firms that trade MXN be positioning themselves for the year ahead?
In the opening panel of the day, Mexico’s Economy: Riding the Storm, economists and strategists from Banorte, Barclays, Santander Asset Management and Banamex will be discussing what a Trump administration means for FX trading in Mexico.