Mexican Peso Leads Emerging FX Loses After Delayed US Payrolls

The Mexican peso was the biggest loser in emerging markets on Wednesday, as currencies were whipsawed by data showing US job growth was far less robust than previously reported. 

The Thai baht, Indonesian rupiah and the Korean won were also among the biggest decliners for the session. The volatility in currencies started even before the jobs report, which was delayed by about half an hour. 

The US payroll revision numbers, which typically fail to move markets, were closely watched this time around for any sign of a weaker economy that could open the way to deeper interest-rate cuts. As it was, the number of workers will likely be revised down by 818,000 in the 12 months through March, according to a preliminary revision. Investors will now turn their attention to the minutes from the policymakers’ last meeting later today. 

It is “strange that after all the drama and buildup, the number really isn’t having much market impact, at least so far,” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. 

The Mexican peso was down for a third straight session ahead of congressional discussions of President Andres Manuel Lopez Obrador’s judicial reform. Under the constitutional overhaul Mexicans would vote the nation’s judges in and out of office, which rating agencies have warned would weaken the country’s institutions. 

Morgan Stanley cut Mexican equities to underweight and Citigroup reduced its oversize exposure to the currency this week. Mexico is also particularly vulnerable to external factors like volatility from the US election or a slowdown in the world’s largest economy. 

Meantime, the Brazilian real and the Colombian peso swung between gains and losses, while stronger copper prices propelled Chile’s peso and Peru’s sol higher. 

“LatAm FX continues to trade erratic, decorrelated not only with the global mood, but among peers themselves,” Citigroup strategists including Ernesto Revilla wrote in a note on Wednesday. 

The two largest exchange-traded funds listed in the US tracking the MSCI emerging-market stock index rose 0.5% for the session, in line with the advance in the S&P 500, as traders looked past the soft jobs data.

Still, the underlying gauge that is heavily weighted toward Asia, slipped for the first session in four. The sub-index for Latin American equities fell for a second day. 

Elsewhere, Egypt’s dollar bonds slipped the most among peers. Sri Lanka’s debt is also drifting lower as investors worry the completion of a restructuring deal could be pushed back by next month’s election. 

The shekel plunged 1.1%, in line with the Mexican peso, as the US top diplomat left the Middle East late Tuesday with Hamas and Israel still divided over an American proposal to pause, if not permanently end, the war in Gaza.

The rand extended losses for a second day as expectations of a September rate reduction built up. The nation’s real interest rate is at the highest level in 18 years, meaning the central bank may consider lowering borrowing costs by 50 basis points at least once this year.

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