Bloomberg News

Mexican Peso Advances as Europeans Move to Assist Spain’s Banks

July 10, 2012

Mexico’s peso rose to a two-month high after European officials moved to shore up Spain’s banks, easing concern the debt crisis will further slow global growth.

The peso appreciated 0.4 percent to 13.3003 per dollar at 9:21 a.m. in Mexico City. It touched 13.2404 in intraday trading, the strongest level since May 8.

The currency rallied as European finance ministers agreed to make 30 billion euros ($37 billion) in emergency loans available to Spanish banks by the end of the month. The peso is gaining on speculation that European officials will put in place “effective firewalls” for bank bailouts, according to Ramon Cordova, a currency trader at Banco Base SA.

While the loans to Spain will go via the government’s bank- restructuring agency, the aim is to convert them into direct European cash injections once the setup of a single European bank supervisor makes that approach feasible, Luxembourg Prime Minister Jean-Claude Juncker said after chairing a meeting of euro-region finance ministers.

“One of these firewalls is that bank bailouts won’t be carried out by the government,” Cordova said by phone from San Pedro Garza Garcia, Mexico. “This is the reason we’re seeing some positive sentiment.”

The yield on Mexican local-currency bonds due in 2024 fell one basis point, or 0.01 percentage point, to 5.34 percent, according to data compiled by Bloomberg. The price rose 0.18 centavo to 142.34 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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