Bloomberg News

Mexico Peso Declines to Weakest Since March on Europe Crisis

June 15, 2011

June 15 (Bloomberg) -- Mexico’s peso dropped to the weakest level in 10 weeks as European leaders were unable to agree on how to deal with the Greek financial crisis, driving the euro lower and reducing demand for riskier assets.

The peso fell 1 percent to 11.9152 per U.S. dollar at 5 p.m. New York time, from 11.7972 yesterday. Earlier, the currency declined to the weakest level since March 31.

“The crisis in Europe is dictating all the movements in the market right now,” said Ramon Cordova, a currency trader at Base Internacional Casa de Bolsa in Monterrey. “The finance ministers were unable to agree on terms and that is making the market nervous.”

The peso has gained 3.6 percent against the dollar this year, the third-best performer among the major Latin American currencies tracked by Bloomberg after Colombia’s peso and Brazil’s real.

The cost to insure Greek and Portuguese debt rose to records as European officials failed to agree on a rescue plan for Greece at an emergency session of finance ministers yesterday. The euro fell as much as 2 percent to $1.4156. Greek Prime Minister George Papandreou will name a new government tomorrow and call a vote of confidence in parliament, a move to pressure revel lawmakers to back the austerity plan that would lead to a new bailout.

The yield on Mexico’s 10 percent peso bond due 2024 fell 2 basis points, or 0.02 percentage point, to 7.22 percent, according to Banco Santander SA. The price of the security rose 0.18 centavo to 123.85 centavos per peso.

Dollar Options

Traders didn’t trigger any of the dollar options available today, the central bank said on its website. None of the options have been exercised this month. The bank has been buying as much as $600 million through the options monthly since March 2010, boosting foreign reserves and curbing the peso’s gain.

Foreign reserves rose to a record $129.6 billion in the week ending June 10, the central bank said yesterday.

The central bank sold 133 billion pesos ($11.2 billion) of Cetes bills today in an extraordinary auction from its holdings, the agency said on its website. The bank had planned to auction as much as 145 billion pesos of the securities, as it seeks to remove liquidity from the market.

--Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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