Peso Falls to Lowest in a Year as NAFTA Seen Delayed

Selcuk Gokoluk and Justin Villamil - Bloomberg
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June 6, 2018


(Photo by Susana Gonzalez/Bloomberg)

The Mexican peso sank to its weakest in more than a year on concern the U.S. may leave the Nafta agreement and try to negotiate two separate free-trade deals with Mexico and Canada.

The currency slid for a fourth day, dropping 1.6 percent to 20.4031 per dollar as of 3:46 p.m. in New York, the second-sharpest retreat among major peers. The cost of insuring Mexican bonds in the credit-default swaps market for five years surged nine basis points to 146.501, climbing for a ninth day in the longest streak since June 2013. Stocks halted a two-day rally.



The peso slumped after White House economic adviser Larry Kudlow said President Donald Trump is “seriously considering” seeking separate trade talks with Canada and Mexico. While he clarified that Trump doesn’t plan to quit Nafta, analysts cited growing concern that a trade pact with the U.S. won’t be approved by Congress before 2019.

Mexico will begin to tax a range of U.S. products in retaliation for tariffs on the Latin American nation’s steel and aluminum that Trump announced last week. The country will slap tariffs of 25 percent on certain cheese products, steel and Tennessee whiskey while imposing taxes of 20 percent on pork, apples and potatoes, according to a resolution published in the Official Gazette early Tuesday.



No Nafta agreement is better than a bad one for Mexico’s presidential front-runner, Andres Manuel Lopez Obrador, who would insist on being part of the trade talks if elected, a top economic adviser said. AMLO, as the candidate is known, would push for Nafta talks to remain trilateral, Gerardo Esquivel said in an interview on Bloomberg TV.

Read what strategists and investors have to say at Bloomberg

Related: Trump Wants Bilateral Nafta Talks But He Won't Quit Accord (Bloomberg)

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