Mexico’s peso dropped as factory output in the New York region shrank more than forecast in December, fueling concern about weakness among manufacturers in the Latin American country’s biggest trading partner.
The peso weakened 0.2 percent to 12.7671 per U.S. dollar at 9:10 a.m. in Mexico City, according to data compiled by Bloomberg. Its rally this year of 9.1 percent is still the biggest among the greenback’s 16 most-traded counterparts.
While an improvement in the U.S. housing market has helped buoy the outlook for Mexican exports, a slowdown in manufacturing is fueling concern the world’s biggest economy is slumping. The Federal Reserve Bank of New York’s general economic index, where readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut, was negative for a fifth month in December. Mexico sends about 80 percent of its exports to its northern neighbor.
“All the data that has to do with manufacturing activity influence” the peso, Mario Copca, a strategist at Metanalisis SA in Mexico City, said in a phone interview. “From very early on we’ve had some pressures on the peso.”
Copca said the lack of an agreement between U.S. political leaders on a budget is also weighing on the peso today. The Congressional Budget Office says the U.S. will probably tumble back into a recession should lawmakers fail to reach an accord to avoid the more than $600 billion in automatic tax increases and spending cuts scheduled to start Jan. 1.
The Fed New York manufacturing index, released today, dropped to minus 8.1, from minus 5.2 in November. The median forecast of 55 economists surveyed by Bloomberg called for minus 1.
Yields on Mexico’s peso bonds due in 2024 were little changed at to 5.46 percent, according to data compiled by Bloomberg. The price rose 0.04 centavo to 139.9 centavos per peso.
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