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Speculators bullish on Mexican peso for first time since 2015

The Mexican peso has shed pretty much all its Trump-election risk premium, becoming one of the best performing major currencies in 2017.

Since hitting a record low of 22 per dollar around the time of President Donald Trump’s inauguration in January, the peso has strengthened nearly 16 per cent.

Investors now seem to think it less likely that Mr Trump’s mooted protectionist policies will damage Latin America’s second-biggest economy to anywhere near the extent that many had feared.

The peso’s rally by mid-session on Monday had taken it back to 18.50 per dollar. It closed the day before November’s US election at 18.59.

Helping the latest surge was the broader market’s renewed and intense “risk-on” tone amid relief about the French election.

Other major emerging market currencies like the South African rand and Turkish lira also delivered notably strong performances at the start of the week.

So, can the peso continue to gain ground?

Investors more and more seem to think so. The latest CFTC Commitment of Traders report shows speculators are holding a net long peso position of 14,244 futures contracts.

That’s the first time the market has been net bullish the peso since a brief period in April 2015.

And with a 14-day relative strength index of 38, the dollar has not yet moved into oversold territory relative to the peso.

jamie.chisholm@ft.com