Mexican peso volatility climbed to the highest level in 18 months as futures traders’ bets on gains in the currency tumbled amid concern the Federal Reserve will reduce a stimulus program that has lowered U.S. yields.
One-month historical volatility, a measure of the magnitude of the peso’s fluctuations during the period, rose to 16.133 percent at 9:14 a.m. in Mexico City, the highest since December 2011, according to data compiled by Bloomberg. The currency fell 0.8 percent to 13.4107 per dollar, the weakest level on a closing basis since July 2012.
The peso and local bonds have tumbled since Fed Chairman Ben S. Bernanke told reporters June 19 that U.S. policy makers may start tapering their bond buying program known as quantitative easing this year.
“The market definitely got very nervous over what the Fed said,” Ramon Cordova, a trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in a telephone interview. “It’s aggressively pricing that quantitative easing will end or get reduced in September and rates will go up in 2014.”
The yields on benchmark government peso bonds maturing in 2024 rose 14 basis points, or 0.14 percentage point, to 6.16 percent, according to data compiled by Bloomberg. The price fell 1.35 centavo to 131.56 centavos per peso.
Futures traders cut net bets on a peso advance against the dollar to 20,949 last week, the lowest since July 2012, data from the Washington-based Commodity Futures Trading Commission showed on June 21.
Yields on inflation-linked debt maturing in December 2014 climbed five basis points to 0.71 percent, according to data compiled by Bloomberg.
Mexico’s consumer prices unexpectedly fell 0.05 percent in the first two weeks of June, the national statistics agency said today on its website. The median forecast of economists surveyed by Bloomberg for an increase of 0.10 percent.
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