MEXICO CITY: Mexico's peso has largely overcome the prospect of a victory by US Republican presidential candidate Donald Trump, but concerns about weak growth, an oil price funk and ballooning debt will limit further gains, economists said on Thursday.
The peso surged back around 7 percent from a record low hit last month as Hillary Clinton gained in opinion polls, but it was little changed after last night's third and final debate between the rivals, trading around 18.60 per dollar.
"Clinton winning is already priced in," said Ernesto Revilla, an economist at Banamex in Mexico City, who thinks the peso may be able to gain a bit more after the Nov. 8 US election.
"We think you could have a relief rally, but not too much because there are other local and global factors affecting the peso," he said, in views echoed by three other economists consulted by Reuters.
The peso plumbed record lows last month near 20 pesos per dollar hours before the first presidential debate when polls showed Trump had a better chance of winning the election and making good on his promise to unwind free trade with Mexico and block remittances from the United States in order to pay for a border wall.
But even before concerns about a Trump victory were taken seriously, the peso sank from around 17.20 per dollar at the start of 2016 to past 19 per dollar in February amid concerns about a bailout of state-run oil company Pemex.
Economic growth has been weaker than expected in Mexico, and low oil prices have undermined the impact of a historic opening of the country's energy sector to private investment.
Mexico also faces the risk of credit rating downgrades if it does not succeed in cutting back spending next year and shrinking its deficit.
Besides the local factors, economists said the currency will be subject to weakness ahead of any move to raise interest rates in the United States, which could push investors to dump emerging market bonds for US Treasuries.
Carlos Serrano, an economist at Bancomer in Mexico City, said the peso could firm to 18 or a little past that in the wake of a Clinton victory.
"But that's it," Serrano said, pointing to the country's debt and the impact of oil prices on the balance of payments and the state-run oil company, which may need more support from the government.
"Those things will not go away overnight."
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