SAO PAULO: The Mexican peso strengthened on Tuesday as traders cheered Democrat candidate Hillary Clinton's performance against Republican Donald Trump in the first US presidential debate.
Many traders fear a Trump victory could threaten Mexican exports to the United States, its biggest single market.
The peso firmed 2.5 percent to its strongest level in a week, rebounding from its weakest-ever drop last week, when polls showed growing support for a Trump presidency. It was the peso's biggest daily rise in more than seven months.
Clinton put Trump on the defensive on Monday night by accusing him of being racist, sexist and a tax dodger.
But analysts say Mexican markets should remain volatile until the Nov. 8 elections as the outcome remains far from certain. That has boosted a debate over whether the Mexican central bank could increase rates to support the peso over the coming months.
Nomura Securities analysts believe it would be too early for a hike at next week's policy meeting, while the bank's gathering in Nov. 17 could prove to be too late.
They recommend investors keep up bets in the peso's weakness, possibly protecting themselves against volatility with FX options.
"We think the prevailing bias in the market (USDMXN upwards) will persist until we get a definitive result on election night or polls suggest an outcome with a high degree of confidence, an event that we see as unlikely for the time being," they wrote in a report.
Rates paid on Mexican interest futures were down across the board. Brazilian rate futures also dropped after the country's central bank reduced its inflation forecasts, fostering bets on a rate cut as soon as October.
Latin American stock markets, however, were mixed as a drop in crude oil prices weighed on shares of oil companies such as Brazil's Petr?leo Brasileiro SA.
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