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The Mexican Peso goes into a free fall as Trump becomes the US president.

November 9, 2016

The Mexican peso is in a free fall after Donald Trump's stunning victory in the U.S. presidential election.

The country's currency hit a new record low as votes were being tallied, suffering a drop of 11%. By early Wednesday morning, the peso had regained some ground, but it was still trading 8% lower.

The Mexican peso, which has become the gauge for sentiment on the election, plunged by more than 13pc to an all-time low against the dollar, its biggest daily move in two decades. 

The U.S. is Mexico's largest trade partner and Trump has attacked Mexico from Day 1 of his campaign.

Trump has proposed slapping tariffs on goods made in Mexico, ending the free trade agreement NAFTA, taxing cash remittances from America to Mexico, and building a wall along the border, which he says Mexico would pay for.

About 30% of Mexico's economy consists of its exports, and almost all of those exports come across the border. Plus, the Mexican economy is already dealing with a litany of headwinds, such as low oil prices and government spending cuts.

Mexico's central bank will hold a joint press conference with the country's finance ministry on Wednesday morning.

The bank could take an emergency action to defend the country's currency. Investors expect it to either hike interest rates or to buy large amounts of pesos to stop it from plunging further.

Mexico's central bank governor, Agustin Carstens, told Milenio TV last week that a "contingency plan" was being prepared should Trump win the election.

The peso acted as a barometer to the presidential campaign, weakening whenever polls swung in favor of Trump, who has pledged to renegotiate the North American Free Trade Agreement and curb illegal immigration by building a wall along the U.S.’s southern border.

U.S. stock futures also tanked as did other stock markets in Japan and China. Trump's anti-trade talk and his unpredictability has led to a great deal of apprehensiveness in the global markets.



 

 

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