Sept. 24 (Bloomberg) -- Mexico’s peso fell the most in three weeks after sales of existing U.S. homes unexpectedly dropped and prices for oil, the country’s biggest export, sank to a one-month low.

The currency weakened 1 percent to 13.5058 per U.S. dollar at 5 p.m. New York time, from 13.3699 yesterday, the biggest decline since Sept. 1. The drop was the steepest among 26 emerging-market currencies tracked by Bloomberg.

Purchases of U.S. existing homes in August dropped 2.7 percent to a 5.1 million annual rate, the National Association of Realtors said today in Washington. Economists estimated sales would rise to a 5.35 million rate, according to the median forecast in a Bloomberg News survey. The U.S. buys about 80 percent of Mexican exports.

“Existing home sales showed a surprise decline in August and that data essentially weighed on investors’ risk appetite,” said Omer Esiner, a senior currency analyst at Travelex Global Business Payments in Washington. “A weaker housing market is a negative for the peso and Mexico’s economy in general because I think there is some correlation between the housing market in the U.S. and remittance payments back to Mexico.”

Oil dropped 4.5 percent to $65.89 a barrel in New York, the lowest in a month, after a government report of a larger-than- forecast gain in U.S. fuel supplies signaled that a glut is forming in the world’s biggest energy-consuming country. Revenue from crude financed 38 percent of Mexico’s budget last year.

“We’re well below the $70 handle right now for crude oil and that is a negative factor for the peso,” Esiner said.

Budget Talks

The peso has slumped 1.1 percent against the dollar this month, the only emerging-market currency to weaken.

Mexico’s lawmakers are in the midst of 2010 budget discussions. The government is seeking to strengthen its public finances as the deepest economic slump since the 1930s reduces tax collection and output falls at the state oil monopoly.

“People are becoming more and more concerned about the merits and the outlook for the reforms to be passed,” said Jaime Valdivia, who manages $800 million of assets for Emerging Sovereign Group in New York. “There’s increased skepticism about the tax measures and tax reforms that Mexico is trying to implement going into 2010.

President Felipe Calderon this month proposed tax-law changes that would generate 176 billion pesos ($13.1 billion) in additional revenue next year. To pass the reforms, he must win the support of the Institutional Revolutionary Party, or PRI, which became the largest party in the 500-member lower house in July midterm elections. Lawmakers from the PRI said this month they will oppose proposed taxes on food and medicine.

Bonds Gain

Yields on Mexico’s 10 percent bond due December 2024 fell four basis points, or 0.04 percentage point, to 8.23 percent, according to Banco Santander SA. The price rose 0.35 centavo to 115.27 centavos per peso.

Mexico’s annual inflation rate slowed to the lowest level in more than a year as costs fell for air travel, tourism packages and avocados in the first half of September.

Consumer prices rose 5 percent in mid-September from the same period last year, the slowest increase since May 2008. Costs climbed 0.39 percent in the first 15 days of the month, the central bank said today on its Web site.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

Last Updated: September 24, 2009 17:46 EDT