Mexico’s peso fell to an 11-month low and bond yields surged after Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank may phase out stimulus that has bolstered demand for the Latin American country’s assets.
The currency slid 1.6 percent to 13.4533 per U.S. dollar at 9:58 a.m. in Mexico City. A close at that level would be the weakest since July 25. Yields on peso bonds due in 2024 rose 38 basis points, or 0.38 percentage point, to 5.89 percent, according to data compiled by Bloomberg, the largest one-day increase since February 2009.
“It’s amazing,” Alejandro Urbina, a portfolio manager who helps oversee about $800 million in emerging-market assets at Silva Capital Management, said in a telephone interview from Chicago. “The move in Mexico certainly has been very dramatic over the past few weeks.”
The peso’s 4 percent drop in two days is the most in emerging markets after Bernanke said yesterday that the Fed may start reducing the $85 billion in monthly bond purchases that have boosted demand for Mexico’s debt. Policy makers could end the asset buying next year if economic risks in the U.S., Mexico’s biggest trading partner, abate, Bernanke said.
Yields on the benchmark debt touched a record low 4.48 percent on May 9 before Bernanke said May 22 that the Fed may reduce the pace of asset purchases if there was sustainable improvement in U.S. employment.
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