Mexican peso shines after president loses some lustre in mid-term vote



LONDON, June 7 (Reuters) - Mexico's peso strengthened to a near-one week high on Monday after mid-term elections confirmed President Andres Manuel Lopez Obrador's MORENA party as the strongest force in the country, but with a reduced majority.

Markets had been watching out for Lopez Obrador retaining or extending his party's super-majority, which would have allowed him to push through more wide sweeping changes, or that he could lose his majority in congress altogether.

"Neither of these seems to have occurred, so MXN has managed to chart a narrow path between two political tail risks this weekend," said Kamakshya Trivedi, co-head of global FX, rates and EM strategy at Goldman Sachs.

The peso MXN= gained as much as 0.6% to 19.8473 to the dollar, making the currency an outlier among many emerging market currencies which were treading water against a steady dollar =USD . The gains have seen the currency turn positive on the year, now up 0.2% in 2021.

The spread of Mexico hard-currency bonds over safe-haven U.S. Treasuries, as measured by the JPMorgan EMBI global diversified index, came in 1 basis point to 335 bps. .JPMEGDMEXR

The election result was positive for institutional stability, said Gustavo Medeiros, deputy head of research at emerging market-focused fund manager Ashmore Group.

"Not losing by a large magnitude also means that he shouldn't U-turn on his strategy, therefore the commitment to tight fiscal policies should remain, which is positive from a creditworthiness perspective and it's something that Mexico investors have been happy about since (Lopez Obrador) took office," said Medeiros.
Reporting by Karin Strohecker and Tom Arnold Editing by Peter Graff

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.