U.S. Commerce Secretary Wilbur Ross triggered a rally in the peso when he said the currency could recover “quite a lot” if his country can reach a sensible agreement with Mexico on the North American Free Trade Agreement.

“The peso has fallen a lot, mainly because of the fear of what will happen with Nafta,” Ross, 79, said in an interview on CNBC on Friday. “I believe that if we and the Mexicans make a very sensible trade agreement, the Mexican peso will recover quite a lot.”

The peso surged 1.9 percent on Friday morning New York time in the wake of Ross’s comments, paring its depreciation over the past year. The 8.7 percent decline in the currency’s value since March 2016 has boosted the cost of imports into Mexico, while making its exports more competitive.

 

Eoin Treacy's view

The Peso has been about the most unloved currency in the world but the speed of the decline spurred the central bank into action and short-term interest rates have been hiked on successive occasions over the last 18 months and a number of other measures to support the currency have also been implemented.

The Dollar accelerated against the Mexican Peso following the Presidential election and hit a least a near-term peak near MXN22 in January. It has now unwound its overextension a break in the short-term progression of lower rally highs will be required to check the downward bias and confirm support in this area.  

The iShares Mexico ETF has also unwound an overextension relative to the trend mean but a sustained move above it will be required to signal a transition to medium-term demand dominance.