Bloomberg News

Mexico Peso Poised for Fifth Weekly Drop on U.S. Job Market

June 01, 2012

Mexico’s peso headed for its fifth consecutive weekly drop as an increase in U.S. unemployment damped the economic outlook for the Latin American country’s biggest trading partner.

The currency pared its losses against the dollar on speculation central banks globally may boost stimulus to spur growth, according to Mario Copca, a currency strategist at Metanalisis SA in Mexico City. The peso was the biggest loser in May among the 16 most-traded currencies tracked by Bloomberg, declining 9.5 percent.

The peso was little changed at 14.3753 per dollar at 1:42 p.m. in Mexico City after falling as much as 1.5 percent to 14.5997, the weakest intraday level since March 30, 2009. The currency is down 2.3 percent this week.

The earlier selloff “was very exaggerated,” Javier Benavides, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in a telephone interview. “It responded very badly to the nonfarm payroll data that came out in the morning.”

U.S. payrolls climbed by 69,000 last month, the Labor Department reported today in Washington. That was less than the most-pessimistic forecast compiled by Bloomberg after a revised 77,000 gain in April that was smaller than initially estimated. The median estimate called for a 150,000 advance in May. The unemployment rate increased to 8.2 percent.

U.S. Economy

The gross domestic product of the U.S. climbed at a 1.9 percent annual rate from January through March, down from a prior estimate of 2.2 percent expansion, revised Commerce Department figures showed yesterday. The Mexican economy depends on exports for about 30 percent of its gross domestic product.

Mexico’s central bank intervened in the foreign-exchange market for the second time in two weeks yesterday, selling $107 million of reserves to slow the peso’s drop. It sold dollars for the first time since December 2009 on May 23.

Since November, the central bank has been offering $400 million daily at an exchange rate that is at least 2 percent weaker than the previous day’s official fix level. It didn’t sell any of its reserves in the first two of three auctions scheduled for today.

The yield on Mexican local-currency bonds due in 2024 fell five basis points, or 0.05 percentage point, to 6.22 percent, according to data compiled by Bloomberg. The price rose 0.53 centavo to 132.87 centavos per peso.

To contact the reporter on this story: Ben 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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