Peso's Plunge: Trump's Win Sends Shockwaves through Mexico's Currency

The Mexican peso experienced its weakest performance in over two years following Donald Trump's victory in the U.S. presidential election. The peso's significant drop highlights emerging market vulnerabilities, amplified by potential USMCA renegotiations and tariffs. Central banks may intervene in cases of severe market dysfunction.

The Mexican peso touched its lowest point in over two years on Wednesday, triggered by Donald Trump's victory in the U.S. presidential election. This event extended a streak of volatility and weakness for the peso, a key emerging market currency. Early trading saw the peso plunge to 20.8100 per dollar, marking a more than 3% dip from its previous close, the steepest decline since Mexico's summer election.

Amid a broadly stronger dollar, the peso endured some of the largest losses, a situation ING's global head of markets, Chris Turner, described as severe for the currency. Turner warned that a possible move to 22.00 cannot be ruled out in the coming weeks, recalling the peso's 8.5% drop after Trump's 2016 win. Investors worry that Trump's presidency could reinstate trade barriers against Mexico.

Turner noted the possibility of Mexican trade challenges if Trump questions the USMCA renewal in 2026. Citi's Luis Costa echoed these concerns, suggesting tariffs could become a reality under Trump's administration. Costa also highlighted potential central bank interventions as the peso has dropped more than 17% this year, partly due to domestic political changes.

(With inputs from agencies.)