The trade involves the currencies of Mexico and Russia, the two emerging markets believed to be the hardest hit by Trump’s foreign policy. In 2016, investors were buying the ruble and selling the peso in the expectation that the Republican candidate would improve relations with Russian President Vladimir Putin and cut trade ties with Mexico after winning the elections. This time around, the change has been reversed when Joe Biden wins the polls.
The peso has recovered more than 6% against the dollar in the past three months, the best performance among the major emerging market currencies, as investors are betting that further stimulus from Biden will help boost exports. Mexicans to the United States The ruble has plunged almost 8% in the same period and markets predict that a Democrat in the White House will likely impose tougher sanctions on Russia.
Not everyone is on board. Sergei Strigo, a London-based money manager at Amundi (U.K.) Ltd., says this year’s elections are too unpredictable to create business opportunities. In 2016, it was buying the Russian currency and selling the peso, but this year it has an overweight position in the Mexican currency and has used the recent selloff to increase its overweight in rubles. Amundi manages more than € 40 billion ($ 47 billion) in emerging market assets.
There are other factors at play. A rebound in world oil prices helped the ruble in 2016, while a drop this year has hurt the Russian currency without hurting the peso. Meanwhile, interest rate cuts have made ruble bonds less attractive to foreign investors.
The aftermath of the last elections is proof that using coins to predict the outcome is complicated. Back then, the ruble continued to rise in 2017 before crashing when Trump was embroiled in allegations of Russian meddling in his campaign. Putin said this week that a bipartisan consensus in the United States on the need to contain Russia had meant that the Trump presidency was not as beneficial to Russia as expected. The Trump administration imposed or expanded sanctions on Russia 46 times, more than ever, he said.
Most analysts and investors still agree that a Biden presidency is unlikely to mark a big improvement in US-Russian relations. A number of new sanctions risks have emerged since the poisoning of opposition activist Alexey Navalny with the banned nerve agent Novichok, which was also used against former Russian military officer Sergei Skripal in the UK in 2018. The Kremlin has also been criticized for supporting the besieged. Cristian Maggio, director of markets. emergent. strategy at TD Securities in London.
