By Michael O'Boyle and Dion Rabouin
(Reuters) - Mexico's peso could gain nearly 5 percent if Hillary Clinton wins the U.S. presidency, according to a Reuters survey of fund managers, even after a significant rally in the currency as polls showed her rival Donald Trump falling behind.
As Trump, a Republican, began gaining in polls in August, the peso tumbled, sinking to a record low near 20 per dollar in mid-September on fears Trump could win and enact economic policy designed to hurt the flow of Mexican trade and remittances.
The peso rallied about 7 percent from its record low as Clinton, a Democrat, advanced in opinion polls, before pulling back from 18.50 since the final presidential debate. Some analysts think it may not appreciate much more.
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But 12 of 14 fund managers who hold Mexican debt said they thought a Clinton victory had not been totally priced in.
The median of the poll projected the peso could firm to 18 per dollar the week after the Nov. 8 election if Clinton wins. The peso closed Thursday at 18.84 per dollar.
Should Trump win, the median forecast was for the peso to tumble more than 10 percent to 21 per dollar.
Part of the peso's weakness has been driven by funds betting against it in the forwards market to offset losses on the 1.65 trillion in peso debt ($88 billion) held by foreign investors.
Taking off those bearish bets could boost the currency.
"Will the Trump unwind break that voodoo on the peso, or is there another shackle? It's not clear," said Andrew Stanners, a fund manager at Aberdeen Asset Management in London.
Any peso rally may be limited by expectations that the U.S. Federal Reserve will hike interest rates in December, as well as concerns about sluggish growth in Mexico and rising government debt, fund managers said.
The peso has been the second-worst performing major currency in 2016 after the British pound. It was already underperforming other emerging market currencies before Trump's rise in polls.
The fund managers polled were divided about its prospects. Eight of them said they thought the peso would not outperform emerging market currencies in 2017. Six forecast the Mexican currency would break out of its funk and outperform.
If Clinton remains clearly ahead in opinion polls, the market may factor in her victory before the vote, said Goldman Sachs economist Alberto Ramos, who expected the peso to hit resistance at 18.50 per dollar.
Even if the peso does reach 18, it would still be down more than 4 percent from its 2015 close at 17.23 per dollar.
Nomura analyst Benito Berber thinks the peso could hit 17.50 by year end if Clinton wins and the Mexican government makes a success of its deep water oil field auctions in December.
Market players are also waiting on a business plan from ailing state oil company Pemex, due next Thursday. Unless promising joint ventures or asset sales emerge from it, concerns about Pemex's financial health risk weighing on the peso.
(Additional reporting by Nichola Saminather, Jean Luis Arce and Natalie Schachar; Editing by Lisa Shumaker)