Ruble Mexican Peso Trump Trade

As the U.S. Presidential election heads toward a November vote, Forex traders have found a couple of foreign currencies to follow. The Ruble and Mexican Peso go up and down according to how well or badly Mr. Trump is doing. Now traders have the Trump trade which according to Bloomberg is the Ruble traded against the Mexican peso.

In the quest for the consummate “Trump trade,” emerging-market investors have found a new odd couple, pairing the currencies of two countries that could be most affected if he wins the presidency.

Amundi Asset Management has been selling the Mexican peso and buying the ruble to profit from the prospect of a victory for Republican nominee Donald Trump, whose hard line on the U.S.’s southern neighbor is as well-known as his admiration for Russian strongman Vladimir Putin. GAM UK Ltd. likes the idea, too, and says it’s gaining popularity.

“Buying the ruble against the peso makes a lot of sense as a Trump trade,” said Paul McNamara, who oversees $6 billion at GAM, including the world’s eighth-biggest emerging-market bond fund.

As Trump gains in the polls the Ruble gains and the peso falls and when Trump falters such as after the first debate the peso rises and the Ruble falls. To a degree the Ruble Mexican Peso Trump trade is a way to hedge one’s bets against the possibility of a Trump victory in November. Aside from the Ruble Mexican Peso Trump trade being a measure of the U.S. presidential election what else is driving these currencies?

Mexican Peso

The peso has more problems than Donald Trump. Business Insider says that the Republican candidate is not the only reason the Mexican peso has been getting creamed.

However, in a note to clients on Wednesday, the Capital Economics team of Neil Shearing, Edward Glossop, and Adam Collins note the peso was still lagging its regional counterparts well before Trump’s rise in the polls.

“Since January 2015, the peso has weakened by more than any other major EM currency.” (We should note that the one exception is the Argentine peso, which has been under pressure because of the country’s inflation)

Mexico has problems with its state owned oil company, Pemex, and its industrial productivity is growing way too slowly. If Mexico could get these two economic factors in line the Ruble Mexican Peso Trump trade would look different.

Russian Ruble

Oil is a big driver of the Russian economy and the Ruble. News of an OPEC deal to limit production drove up the Ruble according to Market Watch.