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The Mexican peso has surged more than 20% in the past 24 hours amid a trade war between the US and Mexico, with the currency jumping as much as 8.5% in New York and 6.3% in Miami.
A week after the president of Mexico, Enrique Pena Nieto, declared a state of emergency to end a trade embargo, the peso surged 5.8% on Thursday.
“It’s a very dangerous moment for the US economy,” said Dan Johnson, senior vice president of market intelligence at Nomura Securities.
“The US is going to be looking for a way to get back on its feet.”
The peso’s rise came as the US Treasury announced it would sell $4.7bn of bonds on the day that Congress adjourns.
In addition, the government said it would use $2.4bn in tax revenues to pay for a plan to reduce the number of people employed by the state-run oil company, Petrobras.
The trade war has caused economic problems in both countries and could cause a spike in the dollar’s value.
The pesos rise came just before a scheduled meeting of the World Bank’s economic committee, where it is expected to vote on a new financing structure for a $15bn bailout package for Petrobrass.
The US president, Donald Trump, has said the country should be willing to sell $1.5tn worth of US Treasuries, which is far less than the $15tn that was earmarked in a bailout package announced by his predecessor, Barack Obama.
“This is not a good trade war for the country, but the world has seen other wars that were very, very destructive,” said Alexei Churkin, the chief economist at BNP Paribas.
“We have seen a lot of wars in history where the price of goods was higher than the value of the goods.”
