Mexican Peso Strengthens as Stimulus Speculation Increases

Mexico’s peso gained versus all of its major counterparts as crude oil surged on speculation China may increase stimulus measures, boosting the outlook for the Latin American country’s second-biggest export.

The peso appreciated 1.3 percent to 13.2904 per dollar at 4 p.m. in Mexico City, the biggest advance among the 16 most- traded currencies tracked by Bloomberg. It touched 13.5231 yesterday, the weakest intraday level since June 29. The peso climbed 0.8 percent this week.

Crude oil rallied in New York after China’s economy grew in the second quarter at the slowest pace since the first three months of 2009, boosting the prospect of more steps by the Asian nation’s government to spur expansion.

“They’re going to add more stimulus because the economy is slowing more than they want,” Win Thin, global head of emerging-market strategy at Brown Brothers Harriman & Co., said by phone from New York.

Mexican crude oil exports accounted for $23.5 billion in revenue in the first five months of this year, according to preliminary data from the national statistics agency.

Rafael Camarena, an economist at Banco Santander SA, said the peso extended gains after a gauge of U.S. consumer confidence fell, increasing speculation the Federal Reserve will take further action to boost the world’s biggest economy.

Mexico sends 80 percent of its exports to the U.S.

The Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly dropped to 72 this month from June’s 73.2 reading. It was the lowest level this year. The gauge was projected to rise to 73.5, according to a median forecast of 69 economists surveyed by Bloomberg News.

Additional Steps

The Federal Reserve has signaled that a further economic slowdown would increase support among policy makers for additional steps to spur the three-year expansion, according to minutes of the June 19-20 meeting released this week in Washington.

“This expectation of more monetary stimulus tends to favor the peso,” Camarena said by phone from Mexico City.

The yield on Mexican local-currency bonds due in 2024 fell eight basis points, or 0.08 percentage point, to 5.29 percent, according to data compiled by Bloomberg. The price rose 0.88 centavo to 142.78 centavos per peso.

To contact the reporter on this story: Ben Bain in Mexico City at bbain2@bloomberg.net

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

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