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The peso is rallying ahead of Mexico's presidential election
REUTERS/Ginnette Riquelme
The Mexican peso was up more than 2% versus the greenback on Thursday.
Mexico holds elections on Sunday.
The Mexican peso rallied Thursday as the country gears up for its presidential election this weekend.
The peso was up 2.15% versus the dollar at 2 p.m. ET.
Javier Guzman, the Banco de Mexico's deputy governor, said Thursday the new government will need to lay out its economic policies "as soon as the electoral process is concluded" and didn't rule out additional rate hikes, even after the central bank raised its main rate last week to the highest it's been since 2009.
The peso has slid nearly 9% since March, when leftist presidential candidate Andres Manuel Lopez Obrador gained a double-digit lead in the race. Three polls out last weekend showed Lopez Obrador ahead of his closest rival, Ricardo Anaya of the conservative National Action Party, by more than 20 percentage points.
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Analysts say a win for the former Mexico City mayor is now essentially priced into the peso. But some are remaining cautious on concerns surrounding the populist policies he floated on the campaign trail.
"A looser fiscal stance under Amlo may help to boost growth next year, but we are concerned that more populist and unpredictable policymaking will weigh on growth over the longer term," Edward Glossop, an economist at Capital Economics who specializes in Latin America, said.
The presidential hopeful has said he wants to increase social spending and eliminate foreign participation in Mexico’s energy sector. He has also taken hits at President Donald Trump, and analysts say he could ratchet up tensions between the US and Mexico.
But with a Lopez Obrador win largely priced in, there is a chance legislative elections could have more influence on the immediate reaction to Sunday’s vote.
"The upshot is that it looks like Congress shouldn’t offer up substantial resistance to [Lopez Obrador's] policy agenda," Glossop said.
A strong showing for the Lopez Obrador's Morena coalition, which is less than four years old, could push the peso lower and trigger further policy tightening by Banxico.
Rafael Elias of Exitox Capital, who also predicts Lopez Obrador will win the presidency, said to expect a period of heightened volatility in Mexico from now until inauguration day in December.
"It will be during that period that investors will get to know AMLO's likely cabinet," Elias said.
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