The Mexican peso is on the verge of breaking into bull market territory.
How things have changed.
After Donald Trump’s upset victory in the U.S. presidential election, the peso was the worst performer among the major emerging-market currencies. At is lowest, it was 22 to the dollar.
But since Jan. 19, the Mexican currency has risen more than 18 percent against the dollar. If it rises at least two more points, it’s considered to be in a bull market.
This represents an important shift after nearly half a decade of weakness, writes Business Insider. After peaking in May 2013, the peso fell more than 50 percent the next four years over worries about interest rates.
The peso has benefited from both foreign and domestic influences. In the U.S., a divided Republican party has forced investors to question how swiftly Trump will be able to implement his economic agenda.
Whether he passes some, all or none of his measures before the end of the year could, in turn, influence how quickly the Fed is able to raise interest rates. Typically, higher interest rates cause a currency to strengthen by making it more appealing to foreign investors, writes Business Insider.
Meanwhile, Trump’s son-in-law Jared Kushner and former Goldman Sachs Group President Gary Cohn, have been said to be a moderating force in the White House, easing jitters and benefiting a trade-sensitive peso.
Strategists at Société Générale lists the Mexican peso as one of its favorite carry trades. They believe the currency could strengthen even more.
One domestic factor that would influence the currency. Some turbulence is expected in the second half of 2017 as the presidential campaign heats up. Mexican President Enrique Peña Nieto is unpopular and faces a strong challenge from populist rival Andres Manuel Lopez Obrador, or “AMLO.” Mexican voters head to the polls in July 2018.
And a radical shift in the Mexican presidency makes investors nervous, reports Business Insider.