Mexican Peso Falls Most in Week on Europe Sovereign Debt Concern

Mexico’s peso declined amid increasing investor concern that a bailout for Cyprus will falter, fanning Europe’s debt crisis and damping global growth.

The currency depreciated 0.3 percent to 12.4544 per U.S. dollar at 11:20 a.m. in Mexico City, the biggest fall on a closing basis since March 6. The drop pared its gain against the dollar this year to 3.2 percent, according to data compiled by Bloomberg.

The peso slumped with most major emerging market tenders as lawmakers in the Mediterranean island nation rejected a levy on bank deposits, risking the country’s bailout package and its membership in the euro. Europe’s debt crisis is reducing investor demand for emerging-market assets, said Ramon Cordova, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico.

“The peso represents something for emerging markets,” Cordova said in an e-mailed response to questions. “It’s the only currency that’s freely convertible with acceptable volume” in Latin America.

Mexico isn’t planning measures to curb the peso’s gains this year, Deputy Finance Minister Fernando Aportela said in an interview in Panama City on March 17.

The currency has gained 2.5 percent since policy makers cut benchmark borrowing costs by 0.5 percentage point on March 8 to a record-low 4 percent.

Yields on Mexico’s peso bonds due in 2024 dropped two basis points, or 0.02 percentage point, to 4.97 percent, according to data compiled by Bloomberg. The price rose 0.18 centavo to 144.70 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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.