October 10, 2016 / 5:51 AM / a year ago

FOREX-Mexican peso climbs as market leans toward Clinton win

* Mexican peso gains about 2 pct at one point

* Canadian dollar firmer, edges away from 6-month low

* Mexican peso, loonie stay firm after Clinton-Trump debate

* Sterling takes breather after Friday’s “flash crash” (Updates prices, adds comments)

By Masayuki Kitano

SINGAPORE, Oct 10 (Reuters) - The Mexican peso surged on Monday as markets trimmed the chances of a victory for Republican nominee Donald Trump’s presidential bid, with his campaign in crisis after vulgar comments he made about women went public.

The Mexican peso rose about 2 percent to 18.91 to the U.S. dollar at one point in early Asian trade - its highest level in nearly a month - and held on to the bulk of its gains after the second presidential debate between Trump and Democrat Hillary Clinton ended.

The peso last stood at 19.018, still up around 1.5 percent.

There seems to be some unwinding of the so-called “Trump trade” in which traders put on bearish bets on the Mexican peso, against the safe haven yen, said a trader for a Japanese bank.

“Selling the Mexican peso versus the yen and the Canadian dollar against the yen had both been pretty popular a short while back,” the trader said.

The Mexican peso rose 1.5 percent to 5.4104 against the yen, .

Trump has vowed he would build a wall on the border with Mexico and renegotiate or scrap the North American Free Trade Agreement (NAFTA) if he is elected.

The peso is unlikely to break above the trading ranges seen since June, even if more position-squaring takes place, said Wu Mingze, FX trader of global payments for financial services provider INTL FCStone in Singapore.

“A full-unwinding of the ‘Trump Trades’ should only bring us to the levels between the 18.00-19.00 consolidation zone,” he said.

In a video released on Friday, Trump is heard talking on an open microphone in 2005 about groping females and trying to seduce a married woman.

The controversy pitched Trump into the biggest crisis of his 16-month-old campaign and deepened fissures between him and establishment Republicans.

The Canadian dollar rose around 0.4 percent to C$1.3254 to the U.S. dollar, edging away from Friday’s low of C$1.3315, its lowest level since mid-March.

Sterling slipped 0.2 percent to $1.2400, taking a breather in the wake of its “flash crash” in Asian trade on Friday, when it suddenly plunged to a 31-year low of $1.1491.

Although sterling later came off that low, it still slid 4.2 percent last week in its worst weekly performance since the week of the UK Brexit vote in late June. Those losses came amid worries that Britain would opt for a “hard” exit from the European Union, in which control of migration into Britain would be favoured over trade access to the EU.

The dollar nursed losses suffered on Friday after U.S. nonfarm payrolls data for September came in below expectations.

Against a basket of six major currencies, the dollar last traded at 96.612, having retreated from Friday’s two-month high of 97.188.

Against the yen, the dollar edged up 0.1 percent to 102.97 after tumbling 1 percent on Friday.

While the headline number for U.S. nonfarm payrolls in September was softer than the market forecast, it was still seen as strong enough to keep the Federal Reserve on track for a possible interest rate rise in December.

“Our base case remains...a Fed rate hike in December followed by another two more hikes next year,” said Heng Koon How, senior FX investment strategist for Credit Suisse.

If a slight tightening of U.S. monetary policy is accompanied by potential fiscal stimulus, it could set the stage for the dollar to strengthen next year, he added. (Reporting by Masayuki Kitano; Editing by Eric Meijer & Shri Navaratnam)

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