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Forex

Peso Plunges Amid Broad Unwind of EM FX Carry Trades

Guavy AI Editorial Team
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USD
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Mexico's peso has come under significant pressure in recent days as investors liquidate their carry trades, causing volatility to spike across Latin American currencies.

Citing rising interest rate volatility, MUFG's Derek Halpenny notes that the broader unwind of EM FX carry trades is putting particular pressure on LatAm currencies. This move has led to a sharp surge in USD/MXN, with the Mexican peso now being one of the worst performing Latin American currencies since September.

The latest IMM positioning data shows Leveraged Funds' long position in the Mexican peso at its highest level since the start of 2023, contributing to the currency's decline. Halpenny warns that this risk aversion could persist and even intensify further.

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