Carstens Says Peso Undervalued by as Much as 10% on U.S. Concern

3/23/2017 Bloomberg

Passport and Mexican PesosMexico’s peso is undervalued by as much as 10 percent even if the “unknown” of bilateral relations with the U.S. is taken into account, central bank Governor Agustin Carstens said.

The currency is closer to where it should be, but is still undervalued by “no more than 10 percent,” Carstens said Thursday in an interview with Bloomberg TV’s Erik Schatzker on the sidelines of a banking conference in Acapulco. Carstens added that while the central bank is watching inflation to ensure it doesn’t get out of hand, for now it is progressing as it should given the price shocks Mexico is facing, such as a surge in gasoline prices.

Mexico felt the initial brunt of Donald Trump’s presidency after the peso crumbled amid threats he’d rework or scrap the North American Free Trade Agreement and build a border wall that Mexico would pay for. The currency has since made a comeback as one of the best performers this year after White House officials said they’re confident a trade deal can be reached to benefit both countries, although it has yet to return to pre-election levels.

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