Mexico Peso Swings Rise as Global Concern Damps Export Outlook

Mexican peso volatility rose to a one-month high as U.S. budget wrangling and European sovereign- debt concern damped the global outlook for the Latin American country’s exports.

One-month historical volatility, which measures the magnitude of the peso’s fluctuations over the period, advanced for a seventh day, the longest stretch since May. It increased to 8.79 percent at 9:26 a.m. in Mexico City, the highest level on a closing basis since Oct. 12, according to data compiled by Bloomberg. The currency depreciated 0.2 percent to 13.0361 per U.S. dollar.

Swings in the peso rose as European leaders struggled to resolve the region’s debt crisis and U.S. politicians negotiated to avoid automatic government spending cuts and tax increases, Rafael Camarena, an economist at Banco Santander SA (SAN) in Mexico City, said in a telephone interview. “The peso has been affected by all of the global volatility,” he said.

Democratic President Barack Obama and congressional Republicans are working to reach an agreement by year-end to avoid a $607 billion “fiscal cliff” in the U.S., which buys about 80 percent of Mexico’s exports.

European leaders are heading into their second confrontation this week, saying they’re likely to fail to agree on a seven-year budget plan just as they were unable to strike a deal on Greek debt.

Mounting concern that Europe’s sovereign-debt crisis will slow global economic growth and reduce the market for Mexico’s exports sank the peso last year, making it Latin America’s worst-performing major currency.

Mexican retail sales rose 3.8 percent in September from a year earlier, the national statistics agency reported today. The median forecast in a survey by Bloomberg was 4 percent.

Yields on Mexico’s peso bonds due in December 2024 rose two basis points, or 0.02 percentage point, to 5.51 percent, according to data compiled by Bloomberg. The price fell 0.18 centavo to 139.53 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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