Mexican peso falls sharply with reform plan
The Mexican peso lost over 2 percent against the dollar as the reform plan that envisages state intervention appeared on the horizon.
A series of reforms planned after the elections in Mexico made the peso the weak link in the universe of developing country currencies.
The Mexican peso lost more than 2 percent of its value against the dollar after Mexican President Andres Manuel Lopez Obrador (AMLO) announced that his reforms that would increase state intervention in the economy would be voted on in the new parliamentary term in September.
The currency’s one-month implied volatility also increased, reaching 14.8 percent. “Volatility is here to stay,” said Brad Bechtel, head of global FX desk at New York-based Jefferies.
“There may be a turbulent period for the peso for a while,” he commented.
Mexican leader AMLO’s left-leaning Morena party and its allies won the election by a wide margin on Sunday, capturing two-thirds of the lower house of parliament.
AMLO will leave the presidency to Claudia Sheinbaum, a member of his party and Mexico’s first female leader, in October.