Mexican stocks, peso take a beating following Trump victory

Mexican stocks, peso take a beating following Trump victory

Troy Powers
November 12, 2016

The euro was flat at $1.0889 EUR= after losing 1 percent overnight.

The euro EUR= fell to $1.0920, its lowest against the greenback since October 28. It's partly why automakers got hit hard on Wednesday from the news of Trump's victory. By early Wednesday morning, the peso regained some ground but it was still down more than 9%.

Asian stocks took the biggest blows, with MSCI's broadest index of Asia-Pacific stocks outside Japan falling 2.3 per cent and the Nikkei in Tokyo closing down 5.4 per cent. Traders were focusing on Trump's promises to boost US economic growth through infrastructure spending and by cutting red tape, rather than uncertainties such as what he might do with trade agreements.

"A surprisingly presidential Trump victory speech seems to have reassured investors, the talk of infrastructure spending and a lack of usual vulgarity allowing for a relative aura of calm".

There are doubts whether the momentum will continue into next week, and gains were focused on the two currencies that would be expected to suffer most from US trade tariffs, protectionism and immigration controls.

"Emerging markets to the sword is the chatter", said Richard Benson, co-head of portfolio investment with currency managers Millennium Global in London.

NEW YORK, Nov 11 (Reuters) - The dollar rose to its highest in nine months against a basket of major currencies on Friday and posted its best week in a year as investors packed on bets that the administration of President-elect Donald Trump would pump up US inflation. Trump has put forward protectionist pledges that analysts say are likely to affect trade, including ties with Mexico and China.

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In oil markets, USA crude futures fell 35 cents to $44.92 a barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price global oils, dropped 28 cents to $46.07 a barrel in London. However, by the time Trump was confirmed the victor and made his speech, financial markets had steadied.

S&P 500 futures tumbled by the maximum 5 percent loss permitted on the Chicago Mercantile Exchange before trading curbs are triggered, then pared their decline to 2 percent as of 8:46 London. The Australian dollar has also strengthened versus the greenback to trade at 0.7678 losing 1.08%.

Mexico chose not to intervene to stem peso losses the morning after Trump's victory, a move many analysts had expected, although the central bank may raise interest rates next week for the fourth time this year.

The euro also rose 1.3 percent against the dollar, while gold soared 2.8 percent to $1,320.30.

Citigroup strategist Dirk Willer said he expected the peso, long a bellwether for investor sentiment about the USA election, to keep weakening and range between 21 and 22 per dollar until it is clear what trade policies Trump will enact.

Oil prices also fell due to the risk off mood, with WTI futures sliding to a low of $43.07 a barrel and Brent touching $44.37 a barrel, the lowest since August 10.

The Japanese yen has been manipulated for years by the Bank of Japan trying to keep the yen artificially weak in the face of badly performing monetary policies and unrealistic inflation goals.