Mexico's peso strengthened to a three-week high on Wednesday as U.S. President Donald Trump said the country's economic future was important to the United States even as he forged ahead with plans for a new border wall.
The peso gained more than 2 percent against the U.S. dollar after Trump said in a speech a strong Mexican economy was good for the United States and that he wanted to see it flourish.
"His rhetoric is starting to change toward cooperation," said Gabriela Siller, an economist at Mexican bank BASE.
The peso, which fell to multiple record lows after Trump's Nov. 8 election, was the best-performing currency on Wednesday among the 36 most-traded in the world, Reuters data showed.
During the election campaign, Trump threatened to impose punitive tariffs on imported goods produced in Mexico and to tear up a joint trade agreement with Latin America's No. 2 economy. Mexico sends about 80 percent of its exports to the United States.
If Trump backs away from imposing tariffs on Mexican goods in talks to renegotiate the North American Free Trade Agreement (NAFTA), the peso may have seen its worst, analysts said.
"If Trump is able to maintain a constructive tone with Mexico on NAFTA renegotiation, then I think at the minimum the peso could find stability and even rally," said Richard Hall, an emerging market analyst at T. Rowe Price.
"But if there is no clear movement toward a constructive dialogue, then the uncertainty that has weighed on the peso will continue," Hall said.
The peso has gained more than 3.5 percent since Trump took office on Friday, when he shied away from mentioning his threats to curb trade with Mexico in his inaugural address.
Mexican President Enrique Pena Nieto and Trump are due to meet at the end of January to discuss trade, immigration and security issues.
Trump has vowed to withdraw from NAFTA, which took effect in 1994, if he cannot renegotiate it to benefit American interests.
Mexico is preparing to discuss changes to trade rules about a product's country of origin to try to avoid a disruptive fight with the United States over commerce, according to sources in the Mexican government.
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