Mexico’s peso fell the most in a week after Spain raised its budget deficit target for 2012, fueling concern a slowdown in the euro-region will damp global expansion.
The peso dropped 0.3 percent to 12.7672 per U.S. dollar at 1:06 p.m. in Mexico City, from 12.7241 yesterday. A close at that level would be the currency’s biggest drop since Feb. 24. Today’s decline pared gains for the week to 1.1 percent and to 9.1 percent for the year.
Spanish Prime Minister Mariano Rajoy announced a new deficit goal of 5.8 percent of gross domestic product, compared with the 4.4 percent target previously agreed with the European Union. Euro-area finance ministers authorized yesterday the region’s bailout fund to issue bonds for the Greek debt restructuring, the first step in releasing funds from the rescue package. Concern over Europe’s debt crisis helped make the peso Latin America’s worst-performing major currency in 2011.
The peso is falling as “the market is a bit negative” today because of European concerns, Ramon Cordova, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in a telephone interview. “There’s fear that Europe will go into recession, some countries on the periphery of Europe already are.”
Retail sales in Germany declined 1.6 percent from December, compared with a 0.5 percent gain predicted by economists, the Federal Statistics Office said today.
With a second Greek aid package wrapped up and the euro region slipping into recession, the leaders committed to a pro- growth agenda that sits uneasily with a deficit-control treaty that was signed today at the 17th summit since the outbreak of the crisis.
“If all of Europe went into recession and it touched the U.S. then there’d be a risk of contagion” for Mexico, Cordova said.
Mexico sends about 80 percent of its exports to the U.S.
The yield on the peso-denominated debt due in 2024 rose three basis points, or 0.03 percentage point, to 6.54 percent, according to data compiled by Bloomberg. The price fell 0.36 centavo to 129.86 centavos per peso.
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