Mexican peso weakens ahead of mid-term elections

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Mexico’s peso declined on Thursday, with eyes on results of mid-terms elections in the country over the weekend, while a rising dollar ahead of U.S. economic data pressured emerging market currencies across the board.

Globally, attention is turning to U.S. non-farm payrolls data on Friday to gauge if a surprisingly strong U.S. economic rebound poses a threat to the assumption that interest rates will stay low for a long time.

The dollar climbed ahead of the data, pressuring riskier emerging markets (EM) currencies. MSCI’s index of EM currencies slipped slightly from all-time highs. Turkey’s lira dropped more than 1% after inflation there rose less than expected, while South Africa’s rand lifted off session lows after ratings agency S&P said the country’s fiscal deficits are declining slightly faster than initial expectations.

Mexico’s peso led declines across Latin America, down 0.7%, with the elections set to determine the nature of reforms in the country. “The lower the vote count for the (ruling party) MORENA-led coalition (in the lower house), the less anxiety about potential adverse changes to Mexico’s institutional framework,” said analysts at Credit Suisse.

They cited initiatives that seek to modify the constitution on the energy front, and limit the powers and reach of independent entities for the benefit of the federal government, as some of the party’s possible reform moves that would see a negative reaction from the market.

Source: El Financiero

Mexico Daily Post