Mexico peso

The week in emerging markets, including our most read, five things we have learned and some long reads for the weekend. Plus the week in a chart: the Mexican peso. 

Pity the poor Mexican peso. Despite the view in the market that Latin America’s second biggest economy is set to outperform its emerging market peers in 2014, the currency has been taking it to the chin since the start of the year. 

Mrs Watanabe has a new beau. And his name is Mexico.

After an intense but torrid affair with the Brazilian real, a fling with the Australian dollar and the Turkish lira, Japan’s legion of retail investors – dubbed “Mrs Watanabe” because women mostly manage the household savings in Japan – are now piling into the Mexican peso. 

By Jude Webber and Pan Kwan Yuk

Oh the perils of being popular.

Mexico’s peso has been a darling emerging market currency – liquid and widely held – and yet it still tumbled to its lowest level in a year on Tuesday. How unfair!

With market eyes on the US Fed and when it might wind up its stimulus programme, plus jitters about a potentially imminent Syria strike, the peso nosedived 0.7 per cent to 13.426 to the dollar. And it’s probably got further to go. 

The Mexican peso fell 0.8 per cent to 12.7226 per US dollar on Wednesday after the country’s central bank cut its growth forecast for 2013.

In its quarterly report, Banxico cut its outlook for growth this year to 2 to 3 per cent, down from its previous estimate of 3 to 4 per cent. Growth guidance for 2014 remain unchanged at 3.2 to 4.2 per cent. 

The mighty peso – or “el súper peso” – as some Mexicans like to call it, is not looking so mighty these days.

One of the best performing emerging market currencies in 2012, the Mexican peso has over the past three weeks fallen 7 per cent against the US dollar. 

The Mexican peso is on a bull run.

Signs that the US is emerging from the financial turmoil in better shape than Europe, a strong move by President Enrique Peña Nieto this week to push through structural reforms, and the prospects of a ratings upgrade from Standard & Poor’s all combined to help propel the peso to its highest level against the US dollar since September 2011 on Thursday. 

What’s up with the Mexican peso? So far this month, the currency has weakened a little, and on Friday it was trading at 12.67 to the US dollar compared with 12.61 at the start of the month. Could it be that the rally since last year is petering out?

Not likely. 

To judge by Thursday’s sell-off of the Mexican peso, investors are more than a little worried about Andrés Manuel López Obrador, the country’s leftwing presidential candidate.

The scare came after a poll, published by Reforma newspaper, showed that López Obrador was now just four percentage points behind Enrique Peña Nieto, current front runner and candidate of the centrist Institutional Revolutionary Party (PRI). 

If Wednesday’s dollar auction by Mexico’s central bank has anyone worried about whether it has finally followed in Brazil’s interventionist footsteps, they shouldn’t worry too much.

True, the auction took place as the peso slid against the dollar on fears stemming from Greece and Europe’s debt crisis was the first currency intervention since 2009. And it was the first time the bank used its dollar-auction mechanism since it was reintroduced towards the end of last year.