Mexican peso, the world’s eighth most-traded currency, surged on Tuesday by the most in over two years, lifted by an emerging markets rally and soothing words from Andres Manuel Lopez Obrador, the country's newly elected president.
The peso firmed over 2.5 percent, by far the biggest gainer among major currencies, as the U.S. dollar broadly weakened.
The 64-year-old former Mexico City mayor, known by his initials Amlo, scored a landslide victory over the weekend in Mexico's presidential election.
Obrador, who ran on an anti-establishment platform that promised to fight corruption and increase social spending, sought to assure investors he would maintain fiscal discipline, respect private investment and the independence of the central bank.
He also said that he will aim to keep Mexico in the North American Free Trade Agreement, known as NAFTA and that he respects the existing Mexican team renegotiating the trade pact adding that he will seek a frank dialogue and friendly ties with the United States.
Carlos Urzua, a 62-year-old economics professor, and Lopez Obrador’s pick to be his finance minister, when he takes office on Dec. 1, told Reuters on Monday that the new government supports ideas such as creating a fiscal committee for prudent economic management, reforms of pensions and cost-cutting at state-owned oil firm Pemex.
Urzua had met with local and foreign investors ahead of the elections. “We certainly want more and more foreign, not just Mexican, investment and we’re going to open the door to everything,” he told the Finacial Times in an interview last month.
“Investors are being reassured by the speeches by Lopez Obrador,” Carlos Capistran, an economist at Bank of America Merrill Lynch (BAML) told Reuters.
"The currency is close to fairly valued and positioning is more balanced" BAML wrote in a report.
Historically, the Mexican peso, which is often used by investors as a proxy for less liquid emerging markets currencies, reached an all time high of 21.92 in January of 2017 and a record low of 0.01 in May of 1972 according to Trading Economics.