Earlier, both presidential candidates traded barbs and accusations in their first debate.
Threats by the Republican presidential candidate Donald Trump to build higher walls, deport migrants and a generally radical rhetoric has seen Mexico become perhaps the most targeted audience in terms of the consequences of the upcoming U.S. elections.
Asian shares recovered and the Mexican peso surged on Tuesday as investors seemed to award the first U.S. presidential debate to Democrat Hillary Clinton over Republican Donald Trump.
Goldman Sachs Group Inc. says the Mexican peso could gain back most of this years' losses against the dollar if Hillary Clinton wins the US election.
Data from the U.S. Commodity Futures Trading Commission on Friday showed speculators had recently ramped up their bearish bets against the Mexican currency. As they have improved, the peso has dropped, hitting an all-time low against the dollar ahead of Monday night's debate.
"Markets fretted that a strong Trump performance would add to his recent momentum, but the consensus takeaway was that Clinton had the upper hand with a sharp performance and the concern in asset markets yielded to a relief rally", said John Hardy, head of currency strategy at Saxo Bank.
Palm Beacher Jack Ablin, chief investment officer at BMO Private Bank, has been tracking the odds of a Trump victory based on the value of Mexico's peso. The peso was set for its biggest advance since February 17, after it had borne the brunt of investor anxiety about the November election, sinking to an all-time low of 19.9333 before the clash between the US politicians. The two candidates remained deadlocked in a virtual dead heat and although the debate was estimated to have drawn 100 million viewers the partisan nature of the election could mean that few minds were changed by yesterday's event. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. European markets had wilted by midday after opening higher.
As Societe Generale noted right after the debate, "Trump didn't lose badly enough to really reduce the uncertainty" about the outcome of the election.
Even after its big jump during Monday's debate, the peso is still down more than 13% since the start of the year. He has also threatened to put a 35% tariff on some goods, such as Ford cars that are made in Mexico and sold in the United States.
Higher-yielding currencies like the Australian and New Zealand dollars also did well, rising 0.3 percent against the US dollar.
To get to the Australian dollar, Schlossberg points out that after Mexico, China is Trump's "biggest nemesis".
Mexico's economy shrank in the second quarter for the first time in three years.
Trump has made global trade his biggest issue in the election, taking an especially dim view of America importing goods from Mexico, and his policies are thus expected to hurt the Mexican economy.