Trump’s Mexico wall may further dent the peso

The Mexican peso (MXN) has rallied against the US dollar (USD) despite Donald Trump’s confirmation that he plans to pursue his election campaign pledge to build a border wall.

The improved sentiment towards the currency was unexpectedly helped by Trump’s speech, as the president also said that a strong Mexican economy was good for the US and that he wanted to see it flourish. “His rhetoric is starting to change toward cooperation,” commented Gabriela Siller, an economist at Mexico’s Grupo Financiero BASE.

Among the more conciliatory comments in his speech, Trump said: “By working together on positive trade, safe borders and economic cooperation, I truly believe we can enhance the relation between our two nations to a degree not seen before in a very, very long time. I think our relationship with Mexico is going to get better.”

Mexican president Enrique Peña Nieto is still scheduled to meet with Trump at the end of this month, despite earlier reports that he might cancel his US trip in protest at the wall going ahead.

However, according to Michelle Hutchison, global head of communications and commentator for personal finance comparison website finder.com the Mexican border wall is likely to have a significant impact on the value of Mexico’s currency as well as the volume of remittances to the country.

“Mexico is already the number one country receiving remittances from the US, with over US$25.68bn sent in 2015 alone, a growth of 7% on the previous year,” said Hutchison, who forecasts that over US$28.7bn will be transferred out of the country to Mexico this year, based on US to Mexico remittance data from 2013-15 from The World Bank.

“While remittances have been incrementally increasing, we predict the international money transfer market to spike significantly in the wake of this announcement, particularly with further reports that Trump may bar money transfers from undocumented Mexicans if Mexico doesn’t contribute to the cost of the wall.

Ahead of next week’s meeting, Mexican ministers visited Trump’s advisers in Washington yesterday for preliminary discussions, at which remittances was likely to have been a key issue.

Hutchison added: “The news is also expected to have a huge impact on the value of the MXN as the uncertainty around the Mexican economy mounts. The increased supply of MXN from people transferring US dollars into the country could lead to a sharp fall in its value. If you are planning to send money to Mexico, it’s important to monitor the exchange rate. In these current conditions it’s never been more crucial to compare money transfer providers to maximise the amount you’re sending to your recipient.”

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