Nov. 4 (Bloomberg) -- Mexico’s peso fell for a fourth day, the longest losing streak since August, on speculation tax measures passed by Congress will fail to stave off the country’s first credit-rating downgrade since 1995.

The Mexican currency dropped 0.3 percent to 13.2999 per U.S. dollar at 5 p.m. New York time, from 13.2564 yesterday. It fell for seven days at the end of August. The peso had the steepest decline against the dollar today among the 26 emerging- markets currencies tracked by Bloomberg.

“Uncertainty and volatility is the name of the game,” said Rafael Amiel, managing director for Latin America at Global Insight Inc. in Eddystone, Pennsylvania. “Rating agencies stated that if Mexico doesn’t put together their fiscal accounts then the sovereign rating for Mexico will come down.”

The opposition-controlled Congress approved on Nov. 1 a permanent 1 percentage-point increase in the sales tax to 16 percent after rejecting President Felipe Calderon’s proposal for a 2 percent consumption tax that would have generated more than double the revenue. Standard & Poor’s and Fitch Ratings say they may downgrade Mexico should the government fail to contain the deficit and offset a drop in oil production.

Analysts from S&P and Fitch said this week they are waiting to see the spending side of the 2010 budget before making a decision on the country’s rating.

The sales tax increase is a “less optimal solution” to rein in the deficit than the government’s proposal to create a consumption tax, Shelly Shetty, an analyst with Fitch, said earlier this week.

‘Disappointing’

“This has been a focus of the markets over the past couple of weeks, but the current developments are that while we’ve made progress, it’s been a little bit disappointing,” said Nick Bennenbroek, head of currency strategy in New York at Wells Fargo & Co. “It has kept the risk of a downgrade at least alive.”

Yields on Mexico’s 10 percent bond due December 2024 rose four basis points, or 0.04 percentage point, to 8.30 percent, according to Banco Santander SA. The price fell 0.40 centavo to 114.54 centavos per peso.

The U.S. Federal Reserve restated today its intention to keep interest rates “exceptionally low” for “an extended period” as long as inflation expectations are stable and unemployment fails to decline.

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

Last Updated: November 4, 2009 17:33 EST