(Bloomberg) -- Amundi SA is ramping up its bet on the Mexican peso, wagering the worst of a four-month selloff has passed.
The Paris-based firm turned overweight on the currency in recent weeks, scooping up cheap pesos as the exchange rate hovers around two-year lows, said Yerlan Syzdykov, who oversees €43 billion ($48 billion) in emerging-market investments at the firm.
That puts Amundi at odds with most of the market, which has dumped the peso due to local political risks, jitters over Trump’s tariff threats and the unwinding of so-called carry trades. It now trades above 19 per dollar — some 14% weaker than in late May.
For Syzdykov, the currency is now cheap and positioning is less crowded. Moreover, factors ranging from shifting odds in the US election to the end of political uncertainty locally make it attractive to build an outsize position on, he added.
“It’s a market that is worth coming back to because I think a lot of investors really got spooked,” he said. “Around 19.5, 20 is a decent level to reenter the Mexican trade for us, and that’s where we started to add back.”
The peso recouped some of its losses last week after Kamala Harris got a boost in the polls following the presidential debate, and could keep on rallying as she gains ground ahead of the vote, he said.
Investors have been betting on a steeper US yield curve and a stronger greenback under Trump. His plans to impose tariffs could be particularly harmful to the peso, as Mexico is the biggest trading partner to the US.
“If we were initially pricing in Trump trade, I think we’re now unwinding it and then turning it more into a Kamala trade, specifically Mexico,” he said. “We’re not saying that Kamala will win, but at least we have a trade that will have even out the chances.”
Too Early
Still, traders broadly agree it’s too early to jump into the Mexican peso again. Firms from Goldman Sachs to Barclays and Citigroup have been burned by bullish trade recommendations in recent weeks and hedge funds scrapped their net bet the currency will rebound.
Rea more: Mexico Becomes Traders’ Nightmare as Peso Slide Deepens
The peso failed to catch a breather Wednesday after the Federal Reserve kicked off its interest-rate cutting cycle, lowering borrowing costs by half a percentage point and propelling risky currencies from South Africa, Colombia and Brazil.
Still, Syzdykov said that uncertainty over Mexican politics is clearing up as the controversial judiciary overhaul that rattled markets for most of the past month was signed into law. Other proposals from President Andres Manuel Lopez Obrador have failed to catch the market’s attention, he said, and a more pragmatic leader, President-elect Claudia Sheinbaum takes office next month.
“I don’t really think this is going to be something that will define the course of Mexican assets,” he said, referring to the judiciary changes.
--With assistance from Carolina Wilson.
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