Mexican Peso Posts Weekly Decline on View Fed to Defer Stimulus

Mexico’s peso posted its first five- day decline in four weeks on speculation the Federal Reserve will defer additional stimulus for the Latin American nation’s biggest trading partner.

The currency has fallen 0.3 percent since Aug. 10, its first weekly drop since the period ended July 20. The peso appreciated 0.4 percent to 13.1225 per U.S. dollar at 4 p.m. in Mexico City.

Signs of an improving U.S. economy are supporting bets that the Fed will hold off in September from a third round of bond buying known as quantitative easing. Mexico’s northern neighbor is the destination for 80 percent of its exports.

“The above-expected growth we’ve seen makes people think that they’ll push back monetary stimulus,” Alejandro Padilla, a strategist at Grupo Financiero Banorte SAB, said in a telephone interview from Mexico City. “However, it’s not enough growth to suggest the U.S. is going to recover at a much stronger pace.”

That is “putting the brakes on the peso’s appreciation,” he said.

The currency has rallied 6.2 percent against the dollar in 2012, the biggest increase among the 16 most-traded counterparts tracked by Bloomberg.

The Thomson Reuters/University of Michigan preliminary August index of U.S. consumer sentiment unexpectedly increased to 73.6 from 72.3 in the prior month. The index of U.S. leading economic indicators gained 0.4 percent in July after a revised 0.4 percent drop in the previous month, the New York-based Conference Board reported.

Yields on peso bonds due in 2024 dropped one basis point, or 0.01 percentage point, to 5.58 percent, according to data compiled by Bloomberg. The price of the securities rose 0.06 centavo to 139.31 centavos per peso. The yields have increased 16 basis points since Aug. 10.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

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

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