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Mexican peso likely to remain volatile, USD/MXN to trade around 18.10 by end-2017 – Lloyds Bank

In the past month, the Mexican peso was the best-performing EM currencies in the past month. The USD/MXN dropped from a high of 18.62 to a low of 17.90 and has subsequently edged up to 18.20, noted Lloyds Bank in a research report. Hammered by political developments on both sides of the Rio Grande, the latest show of strength had more to do with developments at the south of the border.

The ruling party of Mexico narrowly fended off a leftist challenge in state elections. A defeat would mean a leftist win in congressional and presidential elections in June 2018, adding to an already complicated relationship with the U.S. However, the political risks in the US/Mexican relations continue to be high, especially as it pertains to trade. So even if the peso is viewed as undervalued in the long term, it is expected to stay volatile.

According to Lloyds Bank, the USD/MXN pair is expected to trade at around 18.10 by the end of this year and at 17.75 by the end of next year.

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