Bloomberg News

Mexico Peso Tumbles as Europe Concern Overshadows Growth Data

September 28, 2011

Sept. 28 (Bloomberg) -- Mexico’s peso tumbled from a one- week high as concern about Europe’s debt crisis blunted a report that showed Latin America’s second-biggest economy expanded more than forecast in July.

The peso weakened 1.4 percent to 13.5563 per U.S. dollar at 5 p.m. New York time, from 13.3658 yesterday. The currency has dropped 8.8 percent this year, second most among major Latin American currencies tracked by Bloomberg after Brazil’s real.

Italian and Spanish financial market regulators extended bans on short selling of financial shares that were introduced last month in a bid to stem market volatility. Concern over Europe is overshadowing data that Mexico’s national statistics agency released today that showed the economy grew 3.74 percent in July from a year earlier, more than the 3.65 percent median forecast of 14 analysts surveyed by Bloomberg, according to Jorge Perez-Duarte, managing director for emerging-market foreign exchange at TD Securities Inc. in Toronto.

“It’s all about the global backdrop right now,” he said by phone. “Everything is following U.S. equities and this was triggered by the announcement by European authorities that they’re going to extend the short selling ban.”

U.S. stocks fell today as an official said the European Commission is resisting a push to impose bigger writedowns on banks’ holdings of Greek government debt than those agreed on at a July 21 summit. The commission opposes ideas that are being floated by some government officials to get banks to accept bigger so-called haircuts and doesn’t want to have talks about any such attempt, the official said on condition of anonymity because the deliberations are private.

Dollar Options

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.

The yield on Mexico’s benchmark peso-denominated bond due in 2024 rose one basis point, or 0.01 percentage point, to 6.76 percent, according to data from Banco Santander SA. The price of the security fell 0.14 centavo to 128.24 centavos per peso.

Mexico swapped 3.35 billion pesos ($248 million) of fixed- rate debt today, the central bank said on its website. Investors handed over fixed-rate bonds due in June 2015 and December 2016 for debt due in June 2016, the central bank said.

--With assistance from Rebecca Christie in Brussels and Ben Moshinsky in London. Editors: Glenn J. Kalinoski, Brendan Walsh

To contact the reporter on this story: Benjamin Bain in New York at bbain2@bloomberg.net

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


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