Mexican peso at lowest in nearly two months

Man walks past a board displaying the exchange rate of Mexican peso against the U.S. dollar at a foreign exchange house in Ciudad Juarez

Man walks past a board displaying the exchange rate of Mexican peso against the U.S. dollar at a foreign exchange house in Ciudad Juarez

Published Jan 4, 2017

Share

London - Emerging market currencies broadly

strengthened on Wednesday but the Mexican peso touched its

lowest in nearly two months on fears US President-elect Donald

Trump's policies will hurt the economy. Emerging market equities

held at three-week highs.

The peso slipped as much as 0.3 percent against the

dollar, its weakest since Nov. 11, when it fell to a record low.

Mexico's currency has been hit by signs that Trump's threats to

renegotiate NAFTA and punish U.S. companies that move production

outside the U.S. might be more than mere bluster.

On Tuesday, car maker Ford cancelled a planned $1.6

billion factory in Mexico following harsh criticism from Trump,

saying it will invest in a Michigan factory instead

.

Trump also appointed Robert Lighthizer as US trade

representative. Lighthizer helped to stem the tide of imports

from Japan in the 1980s under President Ronald Reagan, with

threats of quotas and punitive tariffs.

"He has been a strong proponent of more restrictive trade

... that's bad news for Mexico for sure," said Per Hammarlund,

chief emerging markets strategist at SEB, adding that Trump's

proposed commerce secretary, Wilbur Ross, was also a hawk. "It

signals that Trump will take a very tough line when it comes to

trade."

The Turkish lira rose 0.5 percent against the dollar

from record lows on Tuesday. The lira has been pressured by

higher-than-expected inflation and by security worries after a

series of gun and bomb attacks. Overnight, Turkey's

parliament voted to extend emergency rule by three months

.

"The continuation of the state of emergency keeps a dampener

on business sentiment, given that [President Tayyip] Erdogan can

pretty much rule by decree," said SEB's Hammarlund. "The lira is

very vulnerable right now."

The benchmark emerging market equities index held

steady at three-week highs, helped by a strong performance in

Asia after a rally on Wall Street.

Investor sentiment was boosted by upbeat manufacturing

surveys from China, the euro zone and the United States. US factory activity rose to a two-year high as new orders surged.

Chinese mainland shares rose 0.8 percent,

the Philippines index gained 2.5 percent and Thai stocks

rose 1.3 percent to their highest since April 2015.

European stocks delivered a more mixed performance. Russian

dollar-denominated stocks fell 1.7 percent - their

steepest daily loss in nearly eight weeks - even though oil

prices edged up after falling 2.4 percent on Tuesday.

South African stocks fell 1.2 percent, but the rand

gained 1.4 percent against a weaker dollar, underpinned

by a rally in precious metals.

The Chinese yuan also steadied, rising 0.2 percent

after Chinese state banks stepped in to support it for a second

day and the central bank set a stronger-than-expected daily

trading midpoint.

But the Malaysian ringgit continued to suffer,

briefly touching a 19-year low. It is considered vulnerable to

rises in US interest rates because of the high foreign

ownership of Malaysian bonds.

The Institute for International Finance reported that

emerging market portfolios recorded the lowest total inflows

since 2008 in 2016 at $28 billion, with debt portfolios

suffering $33.8 billion of outflows.

REUTERS

Related Topics: