Mexico peso rallies over 2 percent, claws back from Trump tumble

Mexico's peso on Tuesday rallied for a second day, rebounding from a historic slump last week weakened by concerns U.S. President-elect Donald Trump could crimp cross-border trade.

The peso strengthened more than 2 percent to 20.2575 per dollar. Following Trump's election the currency hit a record low in its worst two-day slump since a 1995 devaluation.

The peso gained about 0.8 percent on Monday after Trump softened some of his campaign rhetoric that had been directed at Mexico.

But analysts expected the peso would continue to see volatile trading as investors try to decipher what policies Trump could enact as president.

"Investors seem more calm with the possibility that the Donald Trump administration could focus on increasing public spending, distancing itself from the protectionist rhetoric of the campaign," Gabriela Siller, an analyst at Mexican bank BASE, said in a client note.

"However, it is too soon to make conclusions about the policies of his administration in 2017," she added.

During his campaign, Trump vowed to revoke or modify the North American Free Trade Agreement, which encompasses Mexico, the United States and Canada. He also pledged to build a wall on the Mexican border to keep out illegal immigrants.

Last Thursday Mexican Economy Minister Ildefonso Guajardo said Mexico aims to persuade Trump how beneficial NAFTA, which took effect in 1994, is for the region. About 80 percent of Mexico's exports go to the United States.

On Tuesday, Mexico's IPC stock index rose 1.7 percent, also advancing for the second day in a row after it slumped by the most in five years last week.