Mexican Peso Weakens to Eight-Day Low on Greek Vote Concern

Mexico’s peso tumbled to an eight-day low as a pledge by Greek Prime Minister George Papandreou to hold a referendum on Europe’s bailout plan damped demand for higher-yielding assets.

The peso dropped 1.9 percent to 13.6136 per dollar at the close of trading in Mexico City, from 13.3517 yesterday. The currency fell to 13.7744 in intraday trading, the weakest level since it touched 13.8127 on Oct. 20. It has declined 9.4 percent this year.

Papandreou, who has seen his popularity plunge after a raft of austerity measures, yesterday pledged to put the euro area’s latest bailout package to a referendum, saying voters will give him support to proceed with economic reforms. The announcement roiled markets and risked derailing the European plan if the bailout is rejected by voters. Papandreou’s grip on power weakened after his call for a referendum to approve the bailout provoked lawmaker defections from his party.

Concern over Greece “is driving all the markets, and the usual suspects in emerging markets are going to get hit,” Win Thin, the global head of emerging-markets currency strategy at Brown Brothers Harriman & Co. in New York, said by phone. “It’s purely sentiment driven by what’s going on. Mexico is just going to get it.”

Greece’s plan to hold a referendum poses a threat to financial stability in the region, Fitch Ratings said in a statement.

Twenty-four of 25 major emerging-market currencies tracked by Bloomberg declined against the dollar. The peso’s drop was the biggest among the six most-traded Latin American currencies tracked by Bloomberg.

“It’s all just risk-off,” said Thin. “We’re back to uncertainty and that’s what’s driving all the markets.”

The yield on the country’s benchmark peso-denominated bond due in 2024 rose five basis points, or 0.05 percentage point, to 6.53 percent, according to data compiled by Bloomberg. The price of the security fell 0.57 centavo to 130.53 centavos per peso.

To contact the reporter on this story: Benjamin Bain in New York at bbain2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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