Mexican peso plunge against C$ seen dimming Canada export hopes

Thu Sep 15, 2016 4:21pm EDT
 
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By Fergal Smith

TORONTO, Sept 15 (Reuters) - The Mexican peso's plunge to a 2-1/2-month low against the Canadian dollar on Thursday is seen putting further pressure on Canadian exporters who have struggled with weak growth this year.

Canadian industries such as auto parts compete with Mexico to export to the United States. A weaker peso makes it harder for Canadian companies to win market share and attract investment such as new factories.

The peso closed at a record low on Wednesday against the U.S. dollar, which Mexican Finance Minister Jose Antonio Meade said was due to U.S. election uncertainty, lower oil prices and concerns about the next U.S. Federal Reserve move.

A Reuters poll earlier this month showed that the peso was expected to strengthen against the Canadian currency over the next 12 months.

However, strategists say that uncertainty related to the U.S. presidential election will weigh more heavily on the peso than on the Canadian dollar.

"The risks are certainly more pronounced for the Mexican peso than they are for the Canadian dollar, given the more confrontational rhetoric that (Republican presidential candidate Donald) Trump has had toward Mexico." said Ian Gordon, FX strategist at Bank of America Merrill Lynch.

Trump has said he would renegotiate or scrap the North American Free Trade Agreement if he is elected.

Investor concern that major central banks are reluctant to use more monetary stimulus has also triggered selling of emerging market currencies.   Continued...