Mexico’s peso appreciated to its strongest level since September 2011 as the currency continued last week’s rally, spurred by a rate cut that investors are convinced was a one-time reduction.
The peso advanced 0.7 percent to 12.5402 per dollar, the most among 25 emerging-market currencies, at 4 p.m. in Mexico City. It’s the strongest level since September 2011, according to data compiled by Bloomberg.
The peso’s 2.5 percent gain this year has boosted returns on Mexico’s peso-denominated government bonds for foreign investors who have been piling into the debt in part to capture the country’s higher yields. The currency surged on March 8 after policy makers said their first reduction in borrowing costs since July 2009 “doesn’t represent the start of a cycle.” They cut the rate to 4 percent from 4.5 percent.
“By clearly saying it’s a one-off they removed any uncertainty on further cuts,” Italo Lombardi, an economist at Standard Chartered Plc, said in an e-mailed response to questions. “Some analysts were expecting more than the 50 basis points delivered.
Inflation should ease to about the target level of 3 percent in the second half of the year, after peaking at almost 4 percent in coming months, the central bank forecast in a statement accompanying its decision on March 8.
‘‘With inflation controlled, it’s positive in the long-term for the currency and for growth,’’ Ramon Cordova, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in an e-mailed response to questions.
Yields on bonds due in December were little changed at 4.1 percent, according to data compiled by Bloomberg. The price fell 0.01 centavo to 102.95 centavos per peso.
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