09/25/16 Financial Times
The piñata is a papier-mâché model stuffed with sweets that eager Mexican children thump with sticks. Lately, the Mexican peso has seen the stuffing knocked out of it too. It has sunk to levels not seen in real terms since Mexico’s 1994-95 Tequila crisis. One of the reasons for this, among several, is that Donald Trump could become the next president of the US. One of the world’s most heavily traded emerging market currencies is taking one for the world in an early wallop of rising “Trump risk”.
The muscle behind the U.S. economic expansion is the same as the recovery’s weakness, and it lies in one word: Mexico.
The battered Mexican peso has tumbled to historic new lows in recent days, nearing a psychological barrier of 20 pesos to the U.S. dollar and causing anxiety on the streets, at businesses and in the halls of government.
Mexico’s Minister of the Economy Ildefonso Guajardo Villarreal says his predominantly Catholic country is prepared to go to unholy extremes if Republican candidate Donald Trump gets elected in November.
As far as Citigroup Inc. is concerned, Mexico has little choice but to carry out an unprecedented interest-rate increase to arrest a plunge in the peso triggered by Donald Trump’s recent surge in U.S. presidential polls.
A Trump presidency could be a nightmarish scenario for Mexico. And his candidacy alone is already causing some sleepless nights for Mexican economists.
Mexico’s central bank will pay close attention to inflationary pressures stemming from the weak peso while deciding monetary policy, deputy governor Manuel Sanchez said on Thursday.