(Bloomberg) -- Mexico’s peso weakened on concern President-elect Donald Trump will make good on his promises to implement a new order of trade protectionism in the US.
The peso’s steep losses briefly accelerated Friday on an unconfirmed Financial Times report that Robert Lighthizer was asked to be US Trade Representative in the new administration, stoking concern over tariffs.
The peso lost as much as 2.4% to around 20.27 per dollar following the report, which cited people familiar with the discussions, before paring losses back to around 2%. The move comes amid steep declines across emerging market currencies.
“This is just pure fear,” said Gabriela Siller, head of research at Grupo Financiero Base. “With Lighthizer at the helm of US trade policy, a harsh review of the USMCA is expected,” she said, referring to the countries’ free trade deal that will be reviewed in 2026.
Mexico’s peso had been among the most vulnerable currencies to concerns about Trump’s threats to impose tariffs in the run-up to the US election, hitting a two-year low during the vote count. It subsequently pared those losses on bets that Trump’s rhetoric won’t be matched by policy moves once he is in office.
Hedge funds scrapped their bearish wagers on the peso going into election night and held a small net long position on the currency, according to data from the Commodity Futures Trading Commission through Nov. 5. Asset managers, on the other hand, trimmed bullish bets to the lowest level since late 2021.
Now, investors will be closely monitoring Trump’s staff appointments to gauge to what extent he will follow through on campaign promises, said Benito Berber, chief Latin American economist at Natixis.
“The suggestion that trade hawk Robert Lighthizer will run trade policy is an ominous sign,” he said.
--With assistance from Leda Alvim and Vinícius Andrade.
(Adds CFTC data in sixth paragraph.)
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