Bloomberg News

Mexican Peso Declines as Protests in Europe Add to Debt Concern

September 26, 2012

Mexico’s peso dropped as protests against European austerity measures added to concern that leaders won’t be able to stem the region’s debt crisis, damping demand for emerging-market currencies.

The peso depreciated 0.1 percent to 12.8698 per U.S. dollar at 4 p.m. in Mexico City. The peso reduced its rally this year to 8.3 percent, still the best performance among the greenback’s 16 most-traded counterparts. It has gained 3.7 percent in the third quarter.

Developing-nation currencies slumped worldwide and Spanish bond yields surged as demonstrators in Madrid planned a second night of protests against austerity measures, coinciding with a general strike in Greece. European turmoil helped make the peso the worst-performing major currency in Latin America last year.

“The market seems to be jittery,” Eduardo Suarez, a Latin America strategist at Bank of Nova Scotia in Toronto, said in an e-mailed message. “Uncertainty over the bailout request” remains.

Germany, the Netherlands and Finland said late yesterday Spain should bear the cost of problems in its banks, with the European Stability Mechanism assuming only a limited burden in recapitalizations. Spain’s Prime Minister Mariano Rajoy told the Wall Street Journal in comments confirmed by his office that he would “100 percent” seek a rescue if borrowing costs stayed “too high.”

Mexico reported a preliminary trade deficit of $979.2 million for August, above the $800 million deficit predicted by the median of 11 estimates compiled by Bloomberg.

Yields on Mexico’s local currency bonds due in 2024 dropped five basis points, or 0.05 percentage point, to 5.37 percent, according to data compiled by Bloomberg. The price increased 0.52 centavo to 141.38 centavos per peso.

To contact the reporter on this story: Ben Bain in Mexico City at bbain2@bloomberg.net

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


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