Mexico’s peso, the best-performing currency this year, sank on Thursday after leftist candidate Andres Manuel Lopez Obrador gained ground in a poll and as volatility markets indicate a deeper rout closer to the elections.
The peso fell as much as 2.1 percent on Thursday after a Consulta Mitofsky survey showed Obrador’s leading with 32 percent. Investors are expecting a further dip closer to the July 1 presidential election, even though Obrador has taken some steps this year to reassure investors, such as supporting Nafta, TPP and fiscal discipline.
The peso’s six-month implied volatility surged on January 2 above 16% from around 14% in late December. An almost identical situation occurred on April 2, when three-month implied volatility surged from about 12% to above 15%.