Bloomberg News

Mexico Peso Declines as Fed Reduces Forecast for U.S. Growth

June 22, 2011

June 22 (Bloomberg) -- Mexico’s peso declined for the first time this week as Federal Reserve policy makers cut their forecasts for growth in the U.S. economy, the biggest buyer of Mexican exports.

The peso fell 0.1 percent to 11.7945 per dollar at 5 p.m. New York time, from 11.7775 yesterday.

The Fed said it will maintain record stimulus beyond the completion of its $600 billion bond purchase program that ends this month as unemployment remains above 9 percent and the economy slows. The recovery remains “frustratingly slow” two years after the recession ended, Fed Chairman Ben S. Bernanke has said. The U.S. purchases about 80 percent of Mexico’s exports.

“The focus is on the Fed, and the likelihood that they will continue to emphasize the need to maintain accommodative policy,” said Aryam Vazquez, a New York-based economist at Wells Fargo & Co. “This impacts Mexico a little more if we get a prolonged slowdown in the U.S.”

The yield on Mexico’s 10 percent peso bond due 2024 fell 6 basis points, or 0.06 percentage point, to 7.13 percent, according to Banco Santander SA. The price of the security rose 0.59 centavo to 124.76 centavos per peso.

Retail sales rose 4.9 percent in April from last year, more than the median forecast of 2.7 percent gain in a Bloomberg survey, the national statistics agency said today.

The gain is a “positive start” to the second quarter and “indicates that consumption remains a strong driving force behind domestic demand and real GDP growth,” wrote Barclays Plc analyst Marcelo Salomon in a note to clients today.

--Editor: Marie-France Han

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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