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Morgan Stanley says NAFTA risks still lie in Mexican peso
来源： 编辑：编辑部 发布：2018/05/25 09:16:47
MEXICO's peso and Canada's dollar are vulnerable to short-term weakness as talks drag on to salvage the North American Free Trade Agreement (NAFTA), with big swings only likely if a deal is reached quickly or the accord is scrapped altogether, according to Morgan Stanley.
Mexico's currency could drop 10 per cent if the deal is terminated, strategists including Michael Zezas wrote in a note, reported the American Journal of Transportation.
On the other side of tail risks, if the pact is agreed to and signed this year, they would expect the peso to strengthen about five per cent.
"FX is the main shock absorber for any change to the NAFTA policy framework or to expectations," the strategists said. Nonetheless, they wrote that while Mexican equities may gain just two per cent from a deal, they could lose as much as 19 per cent if NAFTA is scrapped.
The US dashed hopes for a quick NAFTA deal amid "gaping differences" on a number of topics, after Canadian Prime Minister Justin Trudeau expressed optimism about reaching an agreement soon.
If negotiators can't reach at least a preliminary accord this month, any resolution may be a long way off. The US doesn't have much time to get a revised deal approved under the current Congress, with mid-term elections on November 6.
Mexico's currency could drop 10 per cent if the deal is terminated, strategists including Michael Zezas wrote in a note, reported the American Journal of Transportation.
On the other side of tail risks, if the pact is agreed to and signed this year, they would expect the peso to strengthen about five per cent.
"FX is the main shock absorber for any change to the NAFTA policy framework or to expectations," the strategists said. Nonetheless, they wrote that while Mexican equities may gain just two per cent from a deal, they could lose as much as 19 per cent if NAFTA is scrapped.
The US dashed hopes for a quick NAFTA deal amid "gaping differences" on a number of topics, after Canadian Prime Minister Justin Trudeau expressed optimism about reaching an agreement soon.
If negotiators can't reach at least a preliminary accord this month, any resolution may be a long way off. The US doesn't have much time to get a revised deal approved under the current Congress, with mid-term elections on November 6.