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The Elections in Mexico and the Volatility of the Mexican Peso in 2024

By: Dr. Alejandro Diaz-Bautista, Economist and Research Professor (PhD).

The recent elections in Mexico have been a historic event, marking the election of Dr. Claudia Sheinbaum as the first female president of the country. Dr. Sheinbaum, former mayor of Mexico City, had the backing of the outgoing President López Obrador and promised to reconcile a nation that has been partly divided.

The National Electoral Institute announced that Sheinbaum had an irreversible lead in the 2024 presidential elections in Mexico.

In terms of the Mexican peso, there has been significant volatility in the foreign exchange market. The peso experienced a sharp increase in implied volatility, reaching the highest level since October, with a monthly indicator soaring to over 16%.

This reflects the market’s reaction to political changes and uncertainty. The peso closed on Thursday at 17.89 pesos per U.S. dollar, representing a 2.03% depreciation from the previous day. Traders and investors are closely monitoring the currency’s volatility, as it has implications for the Mexican economy and international financial markets.

The Mexican peso and stocks are on a losing streak due to fears of a supermajority for the ruling coalition in the next Mexican Congress.

Mexican stocks fell more than 6% on Monday, and the peso closed at its weakest level against the dollar since November, after the country’s ruling party achieved a surprisingly strong electoral result and seemed poised for a supermajority in Congress, which markets fear could bring constitutional changes and diminish checks and balances.

Dr. Claudia Sheinbaum won a landslide victory in the 2024 Mexican presidential elections, as widely expected. But the extent of the gains by the Morena party and its allies took markets by surprise, with some fearing the results could pave the way for the ruling coalition to pass constitutional reforms without opposition support.

A two-thirds supermajority in both chambers of Congress is still in play for Morena, which also won the Mexico City mayoral race by a double-digit margin.

The latest losses mean the peso has weakened more than 4% since the beginning of 2024, a sharp reversal for the currency, which until recently was one of the few in emerging markets that had gained ground against a strong dollar this year.

*Dr. Alejandro Díaz Bautista, International Economist and Research Professor in International Economics at El Colef. Visiting Fellow and Guest Scholar at the Center for U.S.-Mexican Studies based at UC San Diego’s School of Global Policy and Strategy (GPS).

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