Investors Slash Mexican Peso Wagers in Wake of Trump Victory

(Bloomberg) -- Money managers cut their bets on Mexico’s peso in the wake of Donald Trump’s election, fearing that his second administration will spoil the world’s biggest trade relationship.

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Institutional asset managers, composed mostly of pension funds with a longer investment horizon, reduced their net long position on the peso by 16,396 contracts to 9,027, the lowest level since March of 2016, according to data from the Commodity Futures Trading Commission for the week through Nov. 12.

That’s the first CFTC data reflecting positioning following Trump’s victory over Kamala Harris. Leveraged funds remain marginally bullish on the currency.

The Mexican peso has weakened about 17% versus the US dollar this year, lagging all other 15 major currencies tracked by Bloomberg. Still, post-vote losses have been somewhat limited as traders weigh whether risks of a protectionist pivot in the US are priced in.

The peso underperformed most of its developing-nation peers in the run-up to the election as traders shunned riskier bets. Implied volatilities had soared in anticipation of potential binary reactions, and tumbled following Trump’s win.

The currency “has seen the largest sentiment pivot in 2024,” Goldman Sachs Group Inc. strategists including Kamakshya Trivedi wrote in a note. “From being at the heart of the nearshoring enthusiasm and benefiting from spillovers of strong US growth, it is now again facing risks of a deterioration in the trade relationship between Mexico and US.”

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