Bloomberg News

Mexican Peso Depreciates on Global Economic Concern

November 12, 2012

(Corrects and updates bond pricing in last paragraph.)

Mexico’s peso fell for a fourth day, the longest stretch of losses in a month, as the overseers of euro-area bailouts cited risks in Greece, stoking concern that Europe’s crisis will weigh on markets for the Latin American country’s exports.

The currency slid 0.1 percent to 13.2113 per dollar at 4 p.m. in Mexico City, the weakest level on a closing basis since Aug. 30. The peso pared its 2012 rally to 5.5 percent.

The peso declined as an assessment by Greece’s creditors obtained by Bloomberg News indicated that plans to give the nation two more years to meet deficit-reduction targets would open up financing gaps of 15 billion euros ($19 billion) through 2014 and 17.6 billion euros in 2015-2016. European finance ministers meet today after Greek lawmakers passed a 2013 budget needed to unlock bailout funds.

“It definitely doesn’t appear that there’s a solution to the problems that have had the currency depreciating,” Eduardo Rodriguez, a currency trader at Casa de Bolsa Finamex SAB, said in a phone interview from Guadalajara, Mexico. Compared with other currencies, the peso “is a bit more susceptible because positions in its favor were very large.”

The difference in the number of wagers by hedge funds and other large speculators on a gain in the peso, versus those betting on a decline, is shrinking, figures from the Washington- based Commodity Futures Trading Commission show. Net longs fell by 11,587 contracts to 114,422 last week. They rose in September to 141,256, the highest level since at least 1995.

Concern over the impact of Europe’s sovereign-debt crisis helped make the peso Latin America’s worst-performing major currency in 2011.

U.S. Budget

The peso has also weakened as U.S. lawmakers try to reach an agreement to avoid $607 billion in tax increases and spending cuts scheduled to start Jan. 1, according to Rodriguez. Mexico’s northern neighbor is its biggest trading partner.

The yield on Mexico’s peso-denominated bond due in 2024 was little changed at 5.42 percent today, according to data compiled by Bloomberg. The price increased 0.09 centavo to 140.62 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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