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Mexico's peso slid on Friday to a record low of over 21 pesos per U.S. dollar before bouncing back in a volatile session, with some suggesting there was no immediate end in sight for the pain inflicted by Donald Trump's shock U.S. election win.
The peso has become a lightning rod for market anxiety due to fears about the future of Mexican-U.S. trade relations. Trump has vowed to build a border wall between Mexico and the United States, deport millions of illegal immigrants and threatened to rip up the North American Free Trade Agreement.
The currency slumped nearly 4 percent overnight and whipsawed throughout the day on Friday.
The peso's losses deepened after Mexican Finance Minister José Antonio Meade announced no new measures to staunch the slide in a news conference on Friday, then returned to around where it was previously.
So far, Mexican authorities have declined to intervene to stem the peso's losses, a move most analysts had expected, choosing instead to wait until next week's central bank meeting.
A fund manager was surprised the ministry had called another press conference that suggested they could announce some measures to support the peso.
"They have some communications issues," said the manager, who was not authorized to speak with reporters.
Meade sought to defend the government's inaction by arguing that due to widespread global volatility after Trump's win, local currency intervention would have had little impact.
However, some said the government needed to improve how it signaled its thinking to the market, or risk the peso collapse getting even worse.
"At current juncture we have conviction that the situation might get worse before stabilizing (blame it also on the erratic communication and dogmatic approach from Banxico)," BNP Paribas said in a note.
Trump's presidential win has smashed Mexican assets, which are still reeling after his surprise victory. Analysts have lowered their forecasts for Mexico's economic performance as a result.
"Even assuming no trade tariffs, we think that a mix of heightened uncertainty, a weaker peso – leading to higher inflation – and significantly tighter monetary policy will weigh on the Mexican economy," Oxford Economics said in a note, adding that it lowered its 2017 and 2018 growth forecasts to 2.1 percent and 2.2 percent, respectively, from 2.5 percent and 2.4 percent growth previously.
However, some felt it could be an opportune moment to snap up Mexican assets.
"We are taking advantage of the volatility. For example, in the case of Mexico, it looks like a great opportunity to buy stocks and the currency is down dramatically ... Generally speaking this provides a great opportunity," Templeton's Mark Mobius said on CNBC television.
Oxford Economics said it expected the Banco de Mexico to raise interest rates by 50 basis points at the Nov. 17 meeting, and by an additional 75 basis points next year.
Meade also said the government might be ready to design new intervention mechanisms, which it would create alongside the central bank and announce when the time was right.
The peso, the world's worst-performing currency this year, took its biggest two-day tumble in more than 20 years following Trump's victory, while Mexican stocks .MXX diverged from rallying U.S. equities for a second day on Thursday, losing nearly 5 percent. They fell 0.75 percent in Friday afternoon trading.
Speaking with Bloomberg TV on Friday, Banco de Mexico's Deputy Governor Manuel Sánchez said the peso depreciation's pass-through to inflation had so far been mild, an impact he attributed to monetary policy.
