Mexican peso leads Latam FX higher as silver spikes

Mexico's peso led gains across Latin American currencies on Monday, surging more than 1% as widespread retail buying pushed silver prices to eight-year highs.

The peso was supported by silver's 9% gain as retail investors piled into the metal. Mexico was the world's largest silver producer in 2019, according to German database firm Statista.

Silver has become the new focus in a broader retail trading trend sparked by social media forums, which has pumped up prices of several US-listed stocks in which Wall Street investors had large short positions.

The peso was recovering from its worst week in four months after data on Friday showed the Mexican economy had suffered its worst slump since the 1930s.

A rise in oil prices also supported the peso on Monday, helped by falling inventories and hopes of sustained global demand.

Peru's sol currency was set for its best day in more than three weeks. Peru is the world's second-biggest silver producer.

"It will be interesting to see the small players' power and how much further they can push (silver) prices," Hussein Sayed, chief market strategist at FXTM, wrote in a note. "There is no doubt the power of collective retail investors has taken the market by surprise."

Chile, another major silver producer, saw its peso currency rise 0.1%, though gains were stifled by downbeat economic data.

Most other Latin American currencies marked steep losses last week, as possible delays in US stimulus, high COVID-19 infections and a sluggish vaccine rollout dented appetite for risk-driven assets.

Latin American stocks rose in early trade, with the MSCI index rising more than 1% after three weeks of declines.

Elsewhere, shares in UK-listed Mexican silver miner Fresnillo spiked nearly 17% and were set for their best day in more than 10 months.