Nafta Is Bigger Risk to Mexican Peso Than Election: Survey

(Bloomberg) -- Nafta renegotiations are the biggest threat to the Mexican peso this year, outweighing concern about the nation’s presidential election, according to a survey of more than 100 foreign exchange professionals surveyed by Bloomberg at a recent event in Mexico City.

Of those surveyed, 46 percent said the fate of the $1 trillion trade pact is the top macro-economic issue, followed by 34 percent who said the Mexican presidential election was the most important. The eighth round of Nafta negotiations is scheduled for mid-April.

"Anything affecting trade will be reflected and eventually adjust the value of the currency," said Alejandro Cuadrado, global head of foreign exchange at Banco Bilbao Vizcaya Argentaria SA in New York.

The majority of respondents said they expect the peso to end 2018 between 18 and 20 pesos per dollar -- at drop of at most about 8 percent from its current level. The peso lost 0.1 percent to 18.3581 per dollar at 2:54 p.m. Tuesday in New York, while still maintaining the lead among the world’s 16 major currencies this year.

Nafta Is Bigger Risk to Mexican Peso Than Election: Survey

Only 17 percent of those surveyed said that they expected the peso to decline past 20, and 12 percent expected appreciation below 18. Interest rates in Mexico will be between 7 and 8 percent by the end of the year, according to the majority of respondents.

©2018 Bloomberg L.P.