Traders are falling over themselves this week to unload Mexico’s currency, on fears that a U.S. economic downturn would savage Mexico’s economy.
The peso plunged to nearly 13.2 per dollar on Thursday from 12.3 on Wednesday and 10.9 at the end of September.
The latest dive has occurred despite heavy intervention by Mexico’s central bank to stem the rout. It’s the peso’s biggest drop in value since the country’s 1994 devaluation.
This is panic behavior,” said Alberto Bernal, head of emerging-markets research at Bulltick Capital Markets in Miami. “It has nothing to do with Mexico and everything to do with the U.S.”
Bernal said investors and currency traders naturally fear that the turmoil roiling financial markets in the U.S., Mexico’s largest trading partner, will have painful consequences for Mexico: falling exports, falling oil prices and falling remittances.
It all adds up to fewer dollars flowing south of the border, leading to an abrupt re-pricing of the peso.
The peso is just one of many emerging-market currencies that have slumped against the dollar in recent weeks, as investors have pulled funds from markets deemed high risks.
But the turnabout has been particularly hard on the peso, which in early August was below 10 per dollar — the strongest the Mexican currency had been since 2002.
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