The Brazilian real and the Mexican peso weakened for a third consecutive day on Friday, pushed lower by investor concerns that US President-elect Donald Trump’s economic policies could lead the Federal Reserve to raise key interest rates more aggressively.
The peso, which has taken a beating in the wake of Trump’s victory, fell to a new historic low of MXN21.39 to the dollar earlier Friday before recovering to around MXN20.80.
Worries about the future of US-Mexico relations and trade between the two countries has put persistent pressure on the Mexican currency. Trump has vowed to renegotiate the North American Free Trade Agreement (NAFTA) and build a wall between along the border.
Despite the peso’s continued slide, Mexican officials have held off on intervening in the currency markets, even as analysts and market watchers expected a move to shore up the currency. Mexico’s central bank is scheduled to hold a monetary policy meeting on Thursday, and market watchers are anticipating an increase of at least 50bp.
In comments to reporters in Mexico City, Finance Minister José Antonio Meade said the peso’s fall was part of a global trend. “Intervention would have not have had any impact,” he said.
Some investors have decided the sell-off presents a buying opportunity.
Mark Mobius, the executive chairman of Templeton Emerging Markets Group, told CNBC that the peso’s volatility, along with a drop in Mexico’s stock market, was making Mexican assets more attractive.
“In the case of Mexico, it looks like a great opportunity to buy stocks,” he said. “The currency is down dramatically. Chances are it’ll probably stabilize at this level or go a little weaker. We’re taking advantage of the volatility.”
Mobius said he expects the volatility to continue in emerging markets until Trump’s economic policies become clearer.
In Brazil, the real fell by nearly 4% to BRL3.49 before paring its losses to about BRL3.40. The currency has lost nearly 8% since Trump won the US presidential election.
Investors believe Trump’s campaign pledges to ramp up infrastructure spending and enact tax cuts will lead to increased inflation and eventually force the Fed to be more aggressive in its rate hikes.