Mexican Peso Posts Fourth Monthly Advance as QE3 Fuels Demand

Mexico’s peso strengthened for the fourth straight month after the Federal Reserve said it would buy assets to stimulate growth, adding to demand for higher- yielding emerging-market assets.

The peso climbed 2.6 percent this month as of 4 p.m. in Mexico City, the most among major Latin American currencies tracked by Bloomberg, as it benefited from its ties to the U.S., where it sends about 80 percent of its exports. The peso weakened 0.2 percent today to 12.8585 per U.S. dollar.

The Fed announced a third round of asset purchases, known as quantitative easing, on Sept. 13, and pledged to keep interest rates near zero through at least mid-2015. A week earlier on Sept. 6, the European Central Bank unveiled plans for unlimited bond purchases to stem its region’s crisis.

“We keep seeing a very significant flow of foreign investors coming into Mexican markets,” Rafael Camarena, an economist at Banco Santander SA (SAN), said by phone from Mexico City. “The new monetary stimulus from the Federal Reserve is a factor.”

The ECB’s efforts to ease its crisis also contributed to the peso’s gain, Camarena said.

The peso depreciated today as Spain’s banks showed a combined capital shortfall of 59.3 billion euros ($76.3 billion), according to a stress test designed to remove doubts about a financial industry pummeled by real estate losses.

Yields on peso-denominated bonds due in 2024 rose two basis points, or 0.02 percentage point, to 5.40 percent, according to data compiled by Bloomberg. The price fell 0.28 centavo to 141.01 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

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