Market Insider

Mexican Peso, Canadian dollar do about-face, rise on new hopes for NAFTA deal

Key Points
  • The Mexican peso and Canadian dollar extended gains against the dollar when negotiators indicate NAFTA talks would continue into next year.
  • Both currencies had been lower against the dollar earlier Tuesday on concerns the North American Free Trade Agreement was unraveling.
  • Negotiators announced new talks late in the day.
Lighthizer: No active process to withdraw from NAFTA
VIDEO1:4601:46
Lighthizer: No active process to withdraw from NAFTA

The Canadian dollar and Mexican peso reversed losses and jumped against the dollar after the negotiations towards a new NAFTA trade deal into next year.

The two currencies slipped against the greenback earlier in the day, amid reports that Canada and Mexico would not agree to U.S. demands. But their losses were reversed late in the day, after the negotiators announced they would schedule rounds to discuss revamping the North American Free Trade Agreement, into 2018.

"People seemed to have been thinking , and this is going to be the end of it," said Marck McCormick, North American head of foreign exchange strategy at TD Securities. McCormick said those declines reversed "once you got some constructive headlines."

"I think people are focused on knowing 2017 was too ambitious a timeline," he said. "I think you went to two extremes today."

NAFTA trade ministers to extend talks into Q1 2018
VIDEO1:4501:45
NAFTA trade ministers to extend talks into Q1 2018

McCormick said the focus now is on whether the three sides can advance beyond some of the U.S. demands that were seen as a roadblock to a deal. The Trump administration had been reported to be pushing for higher wages for Mexican workers, more NAFTA, especially U.S. parts in automobiles and changes to Canadian dairy subsidies.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland issued a joint statement, following several days of meetings which highlighted progress and the desire to reach a deal to rework the agreement.

The three said they would add more negotiating round through the first quarter of 2018, but McCormick said the market will now watch to see whether the discussions continue too close to next year's Mexican election. They said "significant conceptual gaps" changed the time frame.

Tuesday's action in US dollar against Canadian dollar and Mexican peso 

Source: FactSet