The Mexican peso is getting clobbered as results of the U.S. election are coming in.
The country’s currency crashed 8% to an all-time low Wednesday morning, as the U.S. election race tightened and the prospect of a Donald Trump presidency rose. Earlier the peso was down as much as 11% to an all-time low.
Mexico’s central bank said that it will hold a joint press conference with its finance ministry at 8am ET (7am local time).
U.S. stock futures also tanked as did other stock markets in Japan and China. Trump’s anti-trade talk and his unpredictability has led to a great deal of apprehensiveness in the global markets.
But the U.S. is Mexico’s largest trade partner. And Trump has attacked Mexico from Day 1 of his campaign. No wonder, the peso is falling so hard.
“The Mexican peso has been hit hardest, it’s been the biggest casualty,” says Neil Shearing, chief emerging market economist at Capital Economics, a research firm.
One dollar equaled 20.33 pesos by late Tuesday evening. It has never traded at that level before.
Trump has proposed slapping tariffs on goods made in Mexico, ending the free trade agreement NAFTA, taxing cash remittances from America to Mexico, and building a wall along the border, which he says Mexico would pay for.
A Trump presidency would not bode well for Mexico, which heavily depends on trade with the United States. About 30% of Mexico’s economy consists of its exports, and almost all of those exports come across the border. Plus, the Mexican economy is already dealing with a litany of headwinds, such as low oil prices and government spending cuts.
Shearing forecasts that the value of the currency could fall further — to as low as 25 pesos to the dollar — by Wednesday morning, forcing Mexico’s central bank to call an emergency meeting, and hike interest rates 1% to 2%.
Other economist agree — Mexican officials will have to react soon if Trump does prevail.
“They will react immediately. They won’t be sitting on the sidelines for two or three days,” says Alberto Ramos, head of Latin America economic research at Goldman Sachs.
Mexico’s central bank governor, Agustin Carstens, told Milenio TV in Mexico last week that he and the finance ministry had put together a “contingency plan” if Trump were to win, but declined to give details.