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Talk about going from zero to hero.
The Mexican peso notched its largest quarterly gain in four decades as the currency staged what is probably one of this year’s most dramatic and improbable comebacks following its nosedive in the wake of Donald Trump’s election victory.
The peso is the world’s best performing major currency during the first quarter, clocking in a 10.8 per cent gain against the US dollar during the period. The advance makes this the peso’s best quarter since 1977.
Having been pummelled by Mr Trump’s protectionist rhetoric, attacks on Nafta and promise to build a wall on the US-Mexican border, the peso has mounted a steady recovery since the president’s January 20 inauguration amid more conciliatory comments from the White House.
Investor doubts about Mr Trump’s ability to deliver on his policies intensified last week after he failed to rally enough support for his healthcare bill. Meanwhile, a $20bn foreign exchange hedging programme announced by Mexico’s central bank has boosted the currency. Successive interest rate increases this year have also lent further support.
The peso – one of the most liquid and widely traded currencies in the world – has also benefited from a more risk-on environment. The currency is usually sold off in times of market stress as traders hedge against emerging market risks. This has reversed in recent weeks as the Fed signalled that it will not step up its pace of tightening.