The Mexican Peso fell almost 3% on Monday against the Dollar as Claudia Sheinbaum secured a landslide victory in the presidential election.

The Peso slumped to a new five-week low of 17.5020 to the Dollar, the worst decline since September 2020, according to LSEG data.

As such, Mexico’s currency has weakened 2.4% since the beginning of the year, marking a significant reversal for the currency, which had been one of the few emerging market currencies to appreciate against a robust Dollar until recently.

“In Mexico, the question is whether the Morena party has done so well that it could command a super-majority and try to pursue market non-friendly policies of constitutional reform,” according to Chris Turner, global head of markets at ING.

The former Mexico City mayor secured the presidency with between 58.3% and 60.7% of the vote, as per a rapid sample count by the electoral authority, Reuters reports.

Her victory was widely expected, but the extent of Morena's gains and the possibility of the ruling coalition achieving a super majority have caught markets off guard.

Obtaining a two-thirds super majority in both houses of Congress would enable the group to pass constitutional reforms without needing opposition support.

“That would enable Sheinbaum and Morena to push through constitutional amendments, including those proposed by President Lopez Obrador prior to the election,” stated Jason Tuvey, deputy chief emerging markets economist at Capital Economics.

Lopez Obrador doubled the minimum wage, reduced poverty, and oversaw a strengthening Peso and low unemployment, achievements that made him extremely popular. 

Sheinbaum has pledged to expand the welfare policies that fuelled his popularity and her victory, but this will be challenging given the substantial budget deficit and slow economic growth she is inheriting.