Mexico's peso gains, but set for worst year since 2016

Mexico's peso gained on Thursday in its last trading day of the year after authorities were close to authorizing a COVID-19 vaccine, though the currency was set to close 2020 lower in its worst performance in four years due to weak oil prices.

The peso gained 0.3% after Foreign Minister Marcelo Ebrard said on Twitter that Mexican authorization of AstraZeneca and Oxford University's vaccine was "imminent." Mexico is helping to produce the vaccine and has agreements to receive doses from March.

Latin American stocks and currencies marked their worst year in five years as mounting fiscal concerns fueled by the coronavirus crisis kept sentiment subdued toward risky regional assets.

MSCI's index of LatAm currencies and stocks dropped between 13% and 15% this year, the most since 2015. In comparison, broader emerging market stocks and currencies logged annual gains.

Despite edging higher on Thursday, the Mexican peso was on track to lose 5% for the year as crude oil markets lost about a fifth of their value in 2020, which has weighed on the oil exporting nation's currency.

Columbia's peso, which lost nearly 4% during the year, also tracked losses in oil markets, while lower inflation rates due to the COVID-19 crisis continued to weigh on the currency.

A Reuters poll predicted Colombia's 2020 inflation will hit its lowest level since records began as price increases of 1.45% this year were far below the central bank's targeted 3%.

Brazil's real was the worst performing Latin American currency, falling nearly 30% this year as serious concerns over the country's fiscal health kept investor interest subdued, while Chile's peso was the best-performing currency in the region.

The peso was the sole annual gainer in the region, thanks to a resurgence in the price of copper - the country's largest export.

Recovering industrial demand in China was one of the biggest contributors to the spike in copper prices.

Analysts at ING believe that looser US monetary policies would lead investors to begin to look for higher-yielding emerging markets and take more risk next year.

The rapid spread of the virus in the region led most Latin American stocks and currencies to severely lag their emerging market peers for the year, and investors sought better prospects in Europe and Asia.

MSCI's index of emerging-market currencies was at its highest since April 2018, on course to end 2020 with gains of over 3%. Stocks were at a 13-year peak, heading for a 16% rise this year.