Mexico Currency Hedges See Strong Demand as Pessimists Abound

Strong demand for contracts that protect from declines in Mexico’s peso shows lingering concern the currency is vulnerable to a fresh selloff after a six-week rally.

In its first auction of foreign-exchange hedges, Mexico’s central bank got $2 billion of bids for the $1 billion of securities it offered. Monday’s sale marked the first time authorities have offered the non-deliverable forwards in an attempt to tame the volatility seen since Donald Trump entered the presidential race vowing to crack down on Mexican exports.

While the peso has surged 10 percent since falling to a record low in mid-January, most analysts forecast declines for the rest of the year as Trump threatens to rewrite the North American Free Trade Agreement and discourage U.S. companies from setting up factories in…