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Mexican Peso Falls to Weakest Level in 6 Months on Global Economic Outlook

By Jonathan J. Levin - 2010-08-30T21:16:27Z

Aug. 30 (Bloomberg) -- Nick Chamie, global head of emerging markets research at RBC Capital Markets, about the potential impact of a slowdown in the U.S. economic rebound on emerging markets. Chamie talks win Scarlet Fu on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

Mexico’s peso dropped to its weakest level in six months on concern that global growth may be slowing, including in the nation’s top export market, the U.S.

The currency fell 1.1 percent to 13.1495 per dollar at 5 p.m. New York time, its lowest level since Feb. 8. The currency has weakened 3.9 percent this month, the worst performance among 25 emerging-market currencies tracked by Bloomberg.

“With everyone basically downgrading expectations out of the U.S., you would expect the peso to underperform,” said Ram Bala Chandran, a Latin America currency and rates analyst at Citigroup Inc. in New York.

U.S. incomes climbed 0.2 percent in July, after being unchanged the previous month, Commerce Department figures showed today in Washington. It compared with a rise of 0.3 percent that was the median forecast of economists surveyed by Bloomberg. Mexico ships about 80 percent of its exports to the U.S.

“The picture of global growth is definitely much more uncertain,” said Italo Lombardi, an economist at BNP Paribas SA in New York.

The yield on Mexico’s 10 percent bond due in 2024 rose 10 basis points, or 0.1 percentage point, to 6.72 percent, according to Banco Santander SA. The price fell 1.13 centavo to 130 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 dropped to a record low last year.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at Jlevin20@bloomberg.net