Olivier and Mann – The Mexican peso gained 5 percent this February making it one of the world’s top performers.
Prior to America’s presidential election, Banco Mexico, the country’s central bank had already begun instituting an emergency plan. Agustin Carstens, the bank’s governor said that if put into effect, Trump’s plans have the probability of affecting the country’s growth like a “hurricane”.
For the average Mexican, the appreciation of the peso is hardly noticeable. Fuel prices continue to soar by as high as 20 percent last month while economic expansion and salaries have been stagnant.
The rebound of the Mexican peso has reflected the country’s resiliency against the uncertainty caused by the U.S.
Since November, the country’s central bank has increased interest rates 3 times and has sold a considerable amount of its U.S. dollar reserves to support its currency that had suffered at the hands of Trump’s intimidation tactics.
The possibility of imposing stiff levies on Mexican imports and leaving NAFTA led to the peso sliding to a record low in early January this year. By the second half of January, it had started to rebound.
The emergency plan of Banco Mexico has supported the peso’s latest climb but there are also other issues that have contributed to the peso recovery.
Investors think that the Fed is just waiting for the right moment to increase interest rates, probably in March and this comes as welcome news for emerging markets like Mexico
Some of Trump’s cabinet members have been working to ease the tension between the U.S. and Mexico. A number of investors think that the move indicates that Trump is will not push through on his strongest threats with White house officials praising Mexico/US relations during meetings with Mexican officials last week.
Treasury Secretary Steven Mnuchin together with Mexico’s finance minister, Jose Antonio Meade, highlighted the value of the economic ties between the two countries.