Mexico Peso Drops After Rally as Europe Crisis Dims Fed Optimism

Mexico’s peso fell as European finance ministers hit an impasse at euro-region debt crisis- talks, damping optimism that the global economic expansion was poised to strengthen.

The peso fell 0.4 percent to 12.7713 per U.S. dollar at 4 p.m. in Mexico City, after touching 12.7090 per dollar on Sept. 14, the strongest level since April 3. It rose 2.1 percent last week, the biggest weekly since the period ended June 29.

While Mexico has benefited from speculation that a third round of Federal Reserve bond buying would bolster the world’s biggest economy, a rally in global stocks and emerging-market currencies waned today amid European crisis concern. European Union finance ministers failed to agree on a timetable for a more unified banking industry at a meeting Sept. 14 in Cyprus, while Citigroup Inc. cut China’s 2013 economic growth forecast to 7.6 percent from 8 percent.

“When bad news starts to come out of Europe and uncertainty sets in, investors tend” to sell the peso, Alejandro Padilla, a debt strategist at Grupo Financiero Banorte SAB in Mexico City.

Yields on on Mexican peso bonds due in 2024 fell three basis points, or 0.03 percentage point, to 5.70 percent, according to data compiled by Bloomberg. The price rose 0.35 centavo to 137.87 centavos per peso.

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