Most definitely it seems to be the lull after the storm for the Mexican peso. It has stabilized around 20 pesos per dollar — give or take one peso — and most likely it will not be affected at least over the next month and a half.
Let’s not forget that last month powerful gales threatened Mexican financial stability as at U.S. presidential election time, between Nov. 7 and 9, the peso was considered the worst battered currency in the world with a loss of 6.3 percent in that brief period.
It’s worth noticing that between now and then the peso, though still on the trotting on slippery floor, devaluation dropped to a less than two percent rate as The Donald dropped his tone of pulling Mexico out of the North American Free Trade Agreement (NAFTA) lowering to renegotiating it.
Most likely this week the U.S. Federal Reserve Board of Directors chairwoman Janet Yellen will announce another interest rate hike at most — forecasters claim — by a .25 percent which will not affect the peso-dollar exchange significantly.
For the past week the exchange has stabilized at an average of 17.80 pesos when selling and 20.45 when buying and expectedly will not budge until next January 20 when president-elect Trump takes office and truly starts his four year administration. Until then, expect stability.
But surely the peso will continue to be one of the most volatile currencies given politics. For instance, there was a nervous tick in the markets when Mexico’s Central Bank (Banxico) current director Agustín Carstens announced on Dec. 1 he was stepping down next July as president of the financial institution, speculation broke out loose.
A most common assumption was that he was moving out because after being responsible for more than a 50 percent devaluation during the President Enrique Peña Nieto administration (four years to the day then) he did not want to be responsible for further depreciation and by moving to the Bank of International Settlements (BIS) he would avoid the further embarrassment of seeing the peso plummet even more under his aegis.
Perhaps there might have been some truth in the gossip over Carstens’ resignation but in the end the announcement did not significantly affect the peso, but speculators used to buy more pesos for their dollars.
As for the so-called “Trump Effect,” it remains to be seen what happens with this blabber-mouth president-elect and what’s in his agenda.
In the United States, top-notch businessmen – Bloomberg included – have suggested that Trump move away from both mass deportations of Mexicans whose presence offends many a minute-men who want them out because what will happen is that the jobs now in the hands of those undocumented immigrants will not be filled up, causing a significant dent in the U.S. economy. Taxing their remittances will have also a negative effect, businessmen said.
As for preventing U.S. companies from moving manufacturing to Mexico there’s already a brooding rebellion as enterprises such as Ford Motor Company and Carrier Heating and Air Conditioning — to name a few who are in rebellion against Trump — will continue to work in Mexico.
Also, a NAFTA renegotiation can’t be carried overnight and it will take many months of talks to come to the new terms of the revamped agreement which of course Canada and Mexico agree to.
Another issue that has nothing to do with Donald Trump is the oil market which is currently undergoing significant changes as OPEC has announced a cut in its production but also non-OPEC nations are willing to lower pumping capabilities in order to push prices up, which will strengthen the peso.
In the meantime, a productive dollar will surely signify improved purchasing power in Mexico for the snow birds that spend winter in the nation, and spend their expensive dollars in the land of cheap pesos.
So, things don’t look too bad for the peso at least for the next month.
