The Mexican peso is getting clobbered after Donald Trump’s stunning victory in the U.S. presidential election.
The country’s currency hit a new record low as votes were being tallied, suffering a drop of 11%. By early Wednesday morning, the peso had regained some ground, but it was still trading 8% lower.
Mexico’s central bank will hold a joint press conference with the country’s finance ministry on Wednesday morning.
The bank could take an emergency action to defend the country’s currency. Investors expect it to either hike interest rates or to buy large amounts of pesos to stop it from plunging further.
Mexico’s central bank governor, Agustin Carstens, told Milenio TV last week that a “contingency plan” was being prepared should Trump win the election.
“The Mexican peso has been hit hardest, it’s been the biggest casualty,” Neil Shearing, chief emerging market economist at Capital Economics, said of the post-election market reaction.
On Wednesday morning, $1 was worth just more than 20 pesos.
Shearing said the value of the currency could fall further — perhaps to as low as 25 pesos to the dollar.
Mexican officials are expected to react soon. “They will react immediately. They won’t be sitting on the sidelines for two or three days,” said Alberto Ramos, head of Latin America economic research at Goldman Sachs.
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.
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.
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.