Mexico’s Peso Hammered as Donald Trump Explains “Wall” Policy
$MXNUSD, $F, $GM, $TM
Mexico propped up the Peso Thursday by selling at least $1-B in US currency in morning trading in an attempt to ease the prospect that President Elect Donald Trump’s policies will hurt the economy.
Traders said that Mexico’s central bank made the transactions, but the bank did not make the amount of the currency sales public.
The Peso depreciated 20% in Y 2016, becoming 1 of the world’s worst performing currencies.
Ford Motor Co.(NYSE:F) announced this week that it would no longer build a $1.6-B plant in Mexico. The Peso dove 3.5% 2 days after that announcement.
Donald Trump suggested stopping money transfers from Mexican nationals in the United States unless the country agreed to pay for a wall on the US southern border.
Trump also told Toyota (NYSE:TM) and General Motors (NYSE:GM) this week they would face a “big border tax” if they moved ahead with plans to make cars in Mexico and sell them in America.
Donald Trump had said during the campaign that the tax could be as high as 35%.
Pulling money out of Mexico can create very destabilizing dynamics for the Mexican economy.
Mexico had been the recipient of generous investments from foreigners recently, receiving $29-M in Y 2015 and another $27-B in Y 2016.
“Two interventions in 2 days suggest the central bank has become even more nervous,” a Tokyo-based currency strategist at Brown Brothers Harriman & Co. said.
” Mexico’s problem is a weak economy due to tightened fiscal and monetary policy. The market has priced in a weaker Peso to offset a bad economy.”