Mexico’s currency continued its slow recovery this week, hitting a three-month high of 17.9 to the U.S. dollar Tuesday.
The peso has gained over 3.5 percent this month, largely on weak U.S. inflation figures and higher commodity prices, as well as a temporary spike in oil prices. In addition, the peso has gained ground as the Mexican central bank, Banxico, holds down interest rates at 4.25 percent.
In addition, the poor polling of U.S. Republican presidential candidate Donald Trump has helped the peso’s recovery, according to several sources, including the Wall Street Journal.
Trump’s insistence that he may scrap the North American Free Trade Agreement (NAFTA), send all illegal immigrants home and force Mexico to pay for a border wall has ignited anger south of the border. If such policies ever saw the light of day, the impact on Mexico’s economy – and the peso – would be considerable.
The peso can continue to gain as long as Trump’s poll numbers – currently putting him around eight points behind Democratic Party candidate Hillary Clinton – hold steady, says the Wall Street Journal.
While the Mexican peso has suffered a torrid first half of 2016, at least it doesn’t have the embarrassment of being labeled the world’s worst performing currency.
That honor in recent weeks has gone to the once ever-dependable British pound, which has lost nearly 13 percent of its value against the U.S. dollar since the United Kingdom voted to leave the European Union on June 23.
While “Brexit” probably won’t be enacted until 2018 at the earliest, the pound is unlikely to recover significantly until the full economic effects of the withdrawal from Europe are known. In fact, some experts suggest the pound could drop even further from its current rate of $US1.29 to around US$1.23.
The Mexican peso, on the other hand, has been on a steady decline since 2012, when it was being traded at 13 to the dollar. Even with its current gains, the peso is still one of the worst performing currencies of 2016, having lost around five percent against the dollar since January 1.