The Mexican peso’s hard crash after Donald Trump was elected president came as no surprise given his campaign’s anti-trade and anti-immigration rhetoric.
What few could have predicted was the currency going from being the worst performer following his victory to the best after his inauguration. Since the day before he took office, the peso has rallied 10 percent, twice as much as the No.2 major currency.
The bounce was initially technical. Traders spotted an overreaction after the ballot-box results and began unwinding their bets for further declines. Then the central bank signaled its willingness to auction billions of dollars in foreign-exchange hedges to support the currency. More recently, the driver has been the Trump administration itself, particularly comments from Treasury Secretary Steven Mnuchin in which he outlined a vision for trade that would make winners of both the U.S. and Mexico. That was a long way from Trump’s campaign pledge to slap a 35 percent import tax on companies that moved operations across the border.