the mexican peso, which for investors has been a proxy for donald j. trump <u+2019>s presidential prospects, took a beating early wednesday in the wake of mr. trump<u+2019>s victory. the peso started to dip from the moment the polls closed on tuesday, and it nose-dived overnight to a record low as the 24-hour global currency market digested the outcome of the american presidential election in real time . the currency slid more than 12 percent against the dollar as investors began to wonder what would happen to mexico<u+2019>s autos, oil and other exports, most of which it sends north to the united states. in early trading on wednesday, the peso had trimmed its loss to less than 8 percent. the peso is used as a broad proxy for latin american and other emerging-market investments that are less liquid and easy to hedge. that means that it bears the brunt of market sentiment and that it is a frequent choice of anyone looking to bet against emerging markets, which in turn contributes to its hyperactive response to risky events. mexico, which has the second-largest economy in latin america after brazil, was frequently included in the election campaign headlines as mr. trump discussed plans for building a wall to cut off immigrants and trade between the united states and its southern neighbor. the market may have been unprepared for mr. trump<u+2019>s victory, but it was not unaware of the risk. going into monday, it became very expensive to buy options on the mexican peso <u+2014> a reflection of the market<u+2019>s pricing of uncertainty over the election outcome. traders and investors, however, were not fully prepared for the result, and that lack of preparation contributed to the peso<u+2019>s rout. deutsche bank currency strategists, in a note to investors on monday, compared options to buy and options to sell on the peso-dollar combination and concluded that the market appeared to be covered if hillary clinton won the election but exposed if mr. trump prevailed. the mexican currency is the most traded in emerging markets, and it was sensitive to polls throughout the campaign, waxing when mrs. clinton was in the lead and waning when mr. trump took the edge. still, even in less-sensitive market conditions, the peso has been struggling against the dollar. the value of mexico<u+2019>s currency is tied to the country<u+2019>s oil exports, and it has been on a losing streak since the price of oil started to tumble in 2014.
mexican peso sinks as donald trump secures victory
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