| TORONTO, Sept 15
TORONTO, Sept 15 The Mexican peso's plunge to a
2-1/2-month low against the Canadian dollar on Thursday
is seen putting further pressure on Canadian
exporters who have struggled with weak growth this year.
Canadian industries such as auto parts compete with Mexico
to export to the United States. A weaker peso makes it harder
for Canadian companies to win market share and attract
investment such as new factories.
The peso closed at a record low on Wednesday against the
U.S. dollar, which Mexican Finance Minister Jose Antonio Meade
said was due to U.S. election uncertainty, lower oil prices and
concerns about the next U.S. Federal Reserve move.
A Reuters poll earlier this month showed that the peso was
expected to strengthen against the Canadian currency over the
next 12 months.
However, strategists say that uncertainty related to the
U.S. presidential election will weigh more heavily on the peso
than on the Canadian dollar.
"The risks are certainly more pronounced for the Mexican
peso than they are for the Canadian dollar, given the more
confrontational rhetoric that (Republican presidential candidate
Donald) Trump has had toward Mexico." said Ian Gordon, FX
strategist at Bank of America Merrill Lynch.
Trump has said he would renegotiate or scrap the North
American Free Trade Agreement if he is elected.
Investor concern that major central banks are reluctant to
use more monetary stimulus has also triggered selling of
emerging market currencies.
The peso is treated like a "piñata" by investors looking to
sell emerging market currencies due to its better liquidity,
said Mazen Issa, senior FX strategist at TD Securities.
To be sure, the risk-sensitive Canadian dollar has also lost
ground recently against the greenback. Its 19 percent
depreciation since mid-2014 has fueled hopes for a pick-up in
However, the Canadian dollar has appreciated 20 percent
against the peso over the same period.
Canada's central bank has been looking to non-energy exports
to pick up the slack caused by weak oil prices.
The hollowing out of Canada's manufacturing sector has also
contributed to the disappointing export recovery, reducing its
ability to benefit from U.S. growth, BofAML's Gordon said.
"If you look at the share of the U.S. import market of
Canada, Mexico, China, Japan; Canada has been a clear loser
relative to Mexico and China in particular over the past several
years because of those competitiveness issues." he added.
(Reporting by Fergal Smith; Editing by Cynthia Osterman)