Mexico’s peso tumbled to a six-month low as investors shunned higher-yielding assets amid concern Europe’s debt crisis will damp global economic growth and demand for the Latin American country’s exports.
The currency extended its drop this month against the dollar to 7.6 percent, making it the biggest loser among the major Latin American currencies tracked by Bloomberg.
“It’s more of the same,” Ramon Cordova, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in a phone interview. “It has to do directly with risk aversion.”
The peso slumped 1.5 percent to 14.0882 per dollar at 11:24 a.m. in Mexico City after touching 14.0973, the weakest intraday level since Nov. 28.
Economic confidence in the euro area declined in May to the lowest in more than two years after inconclusive Greek elections raised the specter of a euro breakup and Spain struggled to shore up its banks. The yield on 10-year Spanish debt rose to the highest level since November, approaching the 7 percent mark that preceded bailouts in Greece, Ireland and Portugal.
Concern about how Europe’s sovereign-debt crisis will weigh on global expansion and the market for Mexican exports helped make the peso Latin America’s worst-performing major currency in 2011. The region’s second-biggest economy depends on exports for about 30 percent of its gross domestic product.
The peso also fell after figures from the National Association of Realtors showed today that the number of Americans signing contracts to buy previously owned homes fell in April by the most in a year.
“This is what caused the peso to cross a significant level,” Cordova said.
The yield on Mexican local-currency bonds due in 2024 rose less than one basis point, or 0.01 percentage point, to 6.19 percent, according to data compiled by Bloomberg. The price dropped 0.05 centavo to 133.15 centavos per peso.
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