(Bloomberg) -- The peso advanced after President-elect Donald Trump said he had a productive conversation with Mexico’s president Claudia Sheinbaum, paring some of the losses seen earlier in the week. A later post from her suggested differences remain in how to approach key issues like migration.
The peso gained 1% to 20.38 versus the dollar on Thursday, outperforming all emerging-market currencies. It was a “wonderful conversation,” Trump said late Wednesday in a post on Truth Social.
“She has agreed to stop Migration through Mexico, and into the United States, effectively closing our Southern Border,” Trump wrote in the post. “We also talked about what can be done to stop the massive drug inflow into the United States, and also, U.S. consumption of these drugs.”
About an hour later, Sheinbaum posted on X that in the phone conversation she told Trump that “Mexico’s stance is not to close borders, but to build bridges among governments and peoples.” She also explained the strategy Mexico has had so far to contain migration, “attending to migrants and caravans before they reach the border” and “respecting human rights.”
The peso move was the latest sign of the swings traders can expect from the president-elect’s social media postings. The peso slumped earlier this week to the lowest in more than two years after Trump pledged more tariffs on China, Mexico and Canada, his first specific threats to curb global trade flows since he won the Nov. 5 election.
“The rebound is just temporary and we can expect further volatility and weakness for the Mexican peso,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA. He said the US evening policy tweets remind him of Trump’s first term, expecting that Mexican assets will be under significant pressure.
The peso’s one-month implied volatility surged to highest since 2020 earlier this month after Trump’s victory.
Turning Tide?
The differing tone of the two social media posts underscores the challenges ahead for the policymakers to find common ground. After Trump threatened to impose tariffs, Sheinbaum sent a letter to Trump about Mexico’s success in cracking down on drugs and hinting at retaliating with tariffs on US products.
The following day, Mexico also presented an analysis that found that 25% in levies would cost the US economy as many as 400,000 jobs and increase prices for American consumers.
Mexico has become the US’s largest trading partner, with the Mexican government estimating there’s now $800 billion annually in total trade between the neighboring countries.
--With assistance from Valentine Hilaire.
(Updates with additional background on the conversation)
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