MEXICO CITY?The Mexican peso, one of the world's most actively traded currencies, strengthened 1.3% against the U.S. dollar on Tuesday, extending gains for the fourth consecutive session as Democratic nominee Hillary Clinton consolidated her lead against her Republican opponent in recent days.
The peso closed at 18.38 to the dollar in Mexico City, compared with 18.6485 Monday, a two-month high and far from the record low of almost 20 pesos to the dollar it hit in late September. Local equity prices also jumped ahead of U.S. election results, with the benchmark IPC index rising 0.9% to 48,470 points, its highest level in three weeks.
Mexican assets took a roller-coaster ride in recent months, as the peso became a key emerging market proxy for the U.S. presidential election. Each time Republican nominee Donald Trump gained in polls, the peso took a beating against the dollar.
Tuesday's broad gains "reflected optimism over hopes that Mrs. Clinton would get to the White House," said Gabriela Siller, chief economist at local brokerage Banco Base.
Mr. Trump's pledge to tear up the North American Free Trade Agreement generated anxiety in a country that sends nearly 80% of its exports to the U.S. Mr. Trump has also pledged to crack down on immigration and to build a wall in the U.S.-Mexico border?and make Mexico pay for it.
"If Mr. Trump wins, it would be a Category 5 hurricane for the Mexican economy," Bank of Mexico Governor Agustí n Carstens said in a recent TV interview.
Analysts expect the peso to further strengthen in coming days and puncture through key resistance levels if Mrs. Clinton wins the presidency. Nomura says the peso could reach 17.50 to the dollar next month under benign market conditions.
The peso is the 10th most-traded currency and frequently used as a proxy to hedge global risks, according to the International Bank of Settlements. An average volume of around US$112 billion is traded daily. It is also favored by investors because it trades globally around the clock, and Mexico¿ s orthodox central bank rarely intervenes in currency markets.
In the past year, it has suffered multiple selloffs because of its liquidity and global prominence, from Britain's vote in June to leave the European Union to increasing expectations the U.S. Federal Reserve will raise interest rates this year and, more recently, uncertainty surrounding the U.S. presidential election.
Write to Juan Montes at email@example.com
(END) Dow Jones Newswires
November 08, 2016 18:35 ET (23:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.