Mexican Peso Falls to the Lowest Level in Seven Weeks on Retail Sales Data

Mexico’s peso fell to its lowest level in seven weeks on signs the nation’s economy is slowing and after a report showed a plunge in sales of existing homes in the U.S., the nation’s largest trading partner.

“The latest data out of Mexico shows a marked deceleration in the economy in the second half,” said Alfredo Coutino, director for Latin America at Moody’s Economy.com Inc. in West Chester, Pennsylvania. “Added to that, you also have signs of weakness in the U.S. economy.”

The peso declined 0.5 percent to 12.9736 per dollar at 5 p.m. New York time, from 12.9084 yesterday. It touched 13.0290 earlier today, the weakest level since July 7.

Mexico’s retail sales rose 1.5 percent in June from the same month a year earlier, the statistics agency said yesterday, below the median forecast in a Bloomberg survey for a 4.3 percent increase. Sales of U.S. previously owned homes fell 27.2 percent to a 3.83 million annual rate in July, the lowest in a decade of record keeping.

Coutino forecasts Mexico’s economic growth will slow to 5 percent in the third quarter and 2 percent in the last three months of the year after the nation expanded 7.6 percent in the second quarter, the most since 1998.

‘Weak Data’

“Mexico released another round of weak economic data,” Flavia Cattan-Naslausky, RBS Securities Inc.’s Latin America currency strategist, wrote in a report today. “What is most worrisome about the data is that it comes off of a very lower statistical base, reflecting perhaps one of the most challenging years for Mexico as a result of the swine flu, escalation of drug violence in Juarez, political noise around the fiscal reform and a laggard economic recovery on the back of the U.S.”

The yield on Mexico’s 10 percent bond due in 2024 rose seven basis points, or 0.07 percentage point, to 6.44 percent, according to Banco Santander SA. The price fell 0.83 centavo to 133.17 centavos per peso.

Traders didn’t trigger any of the dollar options available today, the central bank said on its website. So far this month, $447 million in options have been exercised. The central bank has been auctioning $600 million in dollar options monthly, allowing it to purchase dollars to boost foreign reserves after the peso reached a record low last year.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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