Mexico’s peso fell the most in a month after Standard & Poor’s downgraded Spain two levels, deepening concern that Europe’s debt crisis will curb global growth and erode demand for Latin American exports.

The peso slid 0.8 percent to 12.9774 per U.S. dollar at 4 p.m. in Mexico City, its biggest one-day drop since Sept. 10. Its 7.4 percent advance in 2012 is still the most among the dollar’s 16 most-traded counterparts.

The peso extended declines as S&P downgraded Spain two levels to BBB-, the lowest investment rating and one notch below Mexico’s BBB grade, citing mounting economic and political risks. European turmoil and concern about how it would weigh on global growth and the overall market for the Latin American country’s exports helped make the peso the worst-performing major currency in the region last year.

“The lowering of Spain’s rating was a big influence” in the peso’s drop today, Mario Copca, a currency strategist at Metanalisis SA, said by phone from Mexico City. It presents “a risk of bigger outflows toward U.S. Treasuries, which by definition are a refuge for flows in moments of uncertainty.”

The peso may strengthen to its highest level versus the U.S. dollar in more than a year following a corrective phase, JPMorgan Chase & Co. technical analyst Niall O’Connor wrote in a research note published today.

The yield on Mexican fixed-rate local-currency bonds due in 2024 increased one basis point, or 0.01 percentage point, to 5.34 percent. The price dropped 0.09 centavo to 141.65 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