The Mexican peso is plunging (down over 1% today) to its weakest against the dollar since March after a former deputy in the ruling party in Mexico was arrested as part of a graft inquiry.
As Bloomberg reports, political uncertainty continued to weigh on the most-traded currency in emerging markets.
A deepening graft investigation involving Alejandro Gutierrez, a former deputy of sitting President Enrique Pena Nieto could imperil his party’s chances in the coming July elections. An ongoing scandal could also bolster the prospects of leftist rival Andres Manuel Lopez Obrador.
"The news of this arrest scares investors," said Jesus Lopez, a strategist at Banco Base in Monterrey, Mexico.
"These days, the exchange rate is more sensitive because of low liquidity, and we already know that the peso is more vulnerable from the political side."
Allegations that the finance ministry had illegally channeled public money to PRI campaigns prompted the arrest of Gutierrez on Wednesday, Mexican paper Reforma reported.
The Mexican finance ministry rejected reports of impropriety.