marctomarket.com / by Marc Chandler / Oct 21, 2016
It is looking increasingly like the US Presidential election is over but the crying, and most likely the fence between the US and Mexico will not become a wall. The third and final debate was last night and it does not seem to have stopped the hemorrhaging of Trump’s support. The peso had sold off through most of September as the polls drew close. Is it a buy now?
No, it is not. First, it is important to recognize that there are other drivers for the second most actively traded emerging market currency (second to the Chinese yuan) besides US politics. Macroeconomic factors, domestic political forces, oil prices, and the general risk appetite have all be part of the peso story.
Second, it needs to be appreciated that the odds of a Trump victory has steadily fallen since the first debate and before the tapes, which have been in the public space, drew attention. The market’s powerful anticipatory or discounting mechanism needs to be respected. Since September 26, the peso has been the strongest currency in the world. It has risen 7% against the dollar. The next best has been the Brazilian real, which appreciated less than half of what the peso gained.
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