Peso No Longer Mr. Popular with Currency Traders Erin McCarthy - WSJ.com
go to original July 7, 2013

Bets that the Mexican peso would appreciate were once one of the most popular emerging-market currency trades. Not anymore.

The peso plummeted against the dollar in June, as investors fled emerging markets across the board on worries the Federal Reserve could taper its bond-buying stimulus program later this year. Such ultra-loose monetary policy in past years had helped drive investors to seek better returns in higher-yielding assets like the peso. From its 2013 high in May to its low for the year on June 20, the peso weakened 12.8% against the dollar, according to CQG.

The peso’s former popularity ended up hurting it, analysts say. As the emerging-market rout took off in late May and June, many investors had to liquidate their biggest positions, making their hefty bets favoring the peso victims of the risk unwind.

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