The professionals dust off a play they made in the previous elections but this time they play it to the victory of Joe Biden
Traders have resurrected a move they already made in the previous US elections but this time to bet on the defeat of Donald Trump in the US elections to be held on Tuesday, November 3.
Specifically, it is a ‘trade’ carried out with the currencies of Russia and Mexico, two of the emerging economies most affected by the foreign policy of Trump.
In 2016, investors were buying rubles and selling pesos, expecting that Trump’s victory would hurt the Mexican economy and benefit Russia’s, by strengthening ties with Vladimir Putin and cut them off with their southern neighbor.
But now, traders have turned this strategy around.
- The peso has appreciated 6 percent in the last three months, the best performance among emerging currencies, as investors expect that a Biden victory will boost Mexican exports
- The ruble has fallen more than 8 percent in the same period, with the vision that a Democrat at the head of the White House would lead to an increase in sanctions against Moscow.
“Trump is very interested in ingratiating himself with Russia, so what is good for him is good for Russia,” explained Paul McNamara, an emerging debt manager who works at GAM and has $ 4.5 billion of assets under management.
Return to rules-based global commerce
Instead, “it is most likely that Biden would return to a rules-based global trade regime, which would benefit Mexico and China,” adds this expert, in statements to Bloomberg.
In any case, not everyone is so clear about Biden’s victory in these elections. Sergei Owl, from Amundi, says this year’s election date is too unpredictable to create trading opportunities.
Thus, although in 2016 it did buy Russian currency and sold pesos, this year it has both currencies in overweight. In the case of the ruble, it has taken this position after sales recorded in the currency.