Peso Weakens Against Dollar

LONDON (Reuters) – Mexico's peso sank to its weakest level in over two years on Wednesday, as markets braced for a win for Donald Trump in the U.S. election, extending a streak of volatility and weakness for the emerging markets bellwether.

The peso dropped as low as 20.8038 per dollar, marking a decline of more than 3% from its previous close – the biggest decline since the turmoil sparked by Mexico's elections in the summer. While emerging market currencies struggled broadly against a soaring dollar, the peso recorded some of the largest losses.

> "The Mexican peso has been hit hard," said Chris Turner, global head of markets at ING. "High volatility is also undermining the carry trade and it’s hard to rule out a move to 22.00 over coming weeks."

Following Trump's 2016 presidential victory, the peso plummeted approximately 8.5% against the dollar, reaching a then-historic low.

The advance of the U.S. currency began following early indications of a Republican win in Georgia and continued to accelerate, with the dollar index hitting a four-month peak.

Markets have been concerned that Mexico could face trade barriers if Trump assumes the presidency again.

Turner opined that 2025 could be a challenging year for the peso, especially if Trump questions the renewal of the USMCA during its review in 2026. The United States-Mexico-Canada Agreement is the trade pact that took effect in 2020.

Other potential flash points will include issues related to immigration, as well as remittances from Mexico to the U.S.