Tuesday, October 25, 2016

Trump and the Mexican Peso

I heard this on NPR: Justin Wolfers and Eric Zitzewitz have a paper showing how markets respond positively during the first presidential debate when Donald Trump seemed to be doing poorly. What jumped out at me is that the Mexican peso rose during that time.

[T]he Mexican Peso rose sharply during our event window, and indeed, it rose more dramatically than any other currency. In light of Mr. Trump’s threats to restrict both trade and immigration from (and thus, indirectly, remittances to) Mexico, this also suggests that the markets were responding to election-related news.

A Trump victory, then, is not just bad for U.S.-Mexican relations. Markets would also respond negatively, which would make things worse.

Extrapolating, this suggests that the Peso would be worth nearly 30 percent more under a Clinton presidency, and the Canadian dollar would be worth 10 percent more.

So the stakes for Mexico are extremely high. It is unfortunate, then, that Mexican President Enrique Peña Nieto is such a bumbler. Now he says that visit could have gone better. Ya think?


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