The peso gained 0.6% to trade at 19.65 per dollar, after earlier rallying as much as 1.7%. The nation’s dollar bonds lagged emerging-market bonds, slipping across the curve to the day’s low.
Volatility in the currency has soared in the past few months after an unexpected congressional landslide by the ruling party in June’s election. Wednesday’s moves leave the ruling Morena party just short of the two-third majority needed for constitutional change in the senate.
“We have to understand there’s a lot of uncertainty with everything related to Mexico,” said Juan Perez, a trader at Monex in Washington DC. “First of all it’s obvious that with the new administration there’s a stronger and reform-hungry version of Morena.”
The currency has sank almost 14% since the June vote, the worst performance among major currencies. It has also been beaten down by a global unwinding of carry trades and uncertainty over elections and the economy in the US.
The peso rallied earlier after the incoming leader of the ruling party in the lower house said lawmakers won’t rush a controversial proposal to overhaul the country’s judiciary.
“The president-elect has suggested to the parliamentary group” that “we don’t rush, but instead follow the law strictly,” Ricardo Monreal told reporters Tuesday, following a meeting between lawmakers and Sheinbaum. “It’s a suggestion that seems correct to me.”
That was enough to momentarily cheer up investors who on Tuesday drove the peso to the weakest level in almost two years after a key committee swiftly approved the proposal in the lower house.
The currency has been selling off in recent weeks in part as money managers worry that President Andres Manuel Lopez Obrador’s plan to overhaul the judicial system may curtail the independence of judges and remove checks to the ruling party’s power.
The proposal includes replacing all Supreme Court justices with new ones voted into office just as the ruling party enjoys strong popular support.
Monreal said that even though a new congress dominated by Morena begins its work on Sept. 1, that doesn’t mean the judicial reform will be immediately approved.
