Bloomberg News

Mexican Peso Drops on Speculation Central Bank Will Lower Rates

August 30, 2011

Aug. 30 (Bloomberg) -- Mexico’s peso declined on speculation the central bank will cut interest rates to bolster economic growth as the economy in the U.S., the nation’s largest trading partner, slows.

The peso dropped 0.6 percent to 12.5322 per U.S. dollar at 5 p.m. New York time, from 12.4622 yesterday. The currency has weakened 1.5 percent this year against the dollar, the second- worst performer among the major Latin American currencies tracked by Bloomberg after Argentina’s peso.

“We continue to see a weakened global growth outlook and this has led to a recalibration in Mexico’s rate outlook,” said Aryam Vazquez, an emerging markets economist at Wells Fargo & Co. in New York. “The policy meeting last week was very dovish and has heightened expectations of a rate cut.”

Policy makers said on Aug. 26 they would “consider the convenience of adjusting” monetary policy if Mexico’s growth outlook worsened. The U.S. purchases about 80 percent of Mexico’s exports.

The Conference Board’s index, a gauge of U.S. consumer confidence, fell to 44.5, the lowest since April 2009, the New York-based research group said today. In a separate report, home prices fell for a ninth month.

The yield on Mexico’s peso bonds due in 2024 rose 3 basis points, or 0.03 percentage point, to 6.31 percent, according to Banco Santander SA. The price of the security fell 0.35 centavo to 133.09 centavos per peso.

Mexico sold all 5.5 billion pesos of 28-day Cetes it offered at auction today, the central bank said in an e-mailed statement. The government sold all of the 6.5 billion pesos of 91-day bills it offered and all of the 7 billion pesos of 175- day Cetes it offered, the bank said.

Traders didn’t trigger any of the dollar options available today, the central bank said on its website. The bank has been buying as much as $600 million through the options every month since March 2010 to bolster foreign reserves. They allow the central bank to accumulate dollars, insuring against outflows of capital and limiting the peso’s appreciation.

--Editors: Glenn J. Kalinoski, Marie-France Han

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

To contact the editor responsible for this story: David Papadopoulos at

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