Peso at Center of Yen Carry Trade Unwind

The Mexican Peso has been the main victim of recent market moves, being hit both from poor data out of the United States and the unwind of the Yen carry trade. Given the dovish signal from BOJ, and our expectations for no disastrous data out of the US, the P eso is unlikely to resume its steep depreciation with any immediacy . However, looking at data on speculative net positioning and changes in the foreign ownership of Cetes, it is unlikely that the carry trade has been fully unwound. In addition, weakness in US equity markets and the passage of anti-market reforms by the Morena-dominated Congress in September are putting the once almighty ‘S uper- P eso ’ under siege. Beyond the short-term calm, the Peso remains vulnerable.