Mexico Peso Rises to Strongest Since 2011 as RBC Boosts Forecast

Mexico’s peso advanced to its strongest level since August 2011 as RBC Capital Markets raised its forecasts for the currency for this year on prospects for export growth and higher capital inflows.

The currency touched 12.1316 in intraday trading, according to data compiled by Bloomberg. It traded little changed at 12.1705 at 9:18 a.m. in Mexico City. The peso has rallied 5.6 percent this year, the most among the greenback’s 16 most-traded counterparts. Yields on benchmark local currency debt headed for record lows.

Mexico’s peso has surged in 2013 as expectations that government reforms will boost growth improve the outlook for Latin America’s second-biggest economy and spur foreign inflows. The peso will end the year at 12.15 per dollar, RBC wrote in a note today to clients in which it raised the forecast from 12.25.

“The bias in terms of the currency’s direction is to remain strong,” Nick Chamie, RBC’s global head of foreign- exchange strategy and the author of the report, said in a telephone interview. “We would focus primarily on the aggressive reform agenda and the likelihood that capital inflows are likely to remain also solid alongside the gains that Mexico is making in trade.”

Banorte’s View

President Enrique Pena Nieto said over the weekend that Mexico’s economy could expand 6 percent if lawmakers approve the reforms outlined by the nation’s three biggest political parties in the so-called Pact for Mexico on Dec. 2, according to an article from Mexican news agency Notimex published on the website of CNNExpansion. Grupo Financiero Banorte SAB raised its short-term outlook for the peso to “positive” from “neutral,” according to a note to clients published today.

The most recent data from the central bank show the percentage of fixed-rate government bonds held by global investors is at a 13-year high of more than 56 percent.

The yield on Mexico’s peso-denominated bond due in 2024 tumbled eight basis points, or 0.08 percentage point, to 4.81 percent, according to data compiled by Bloomberg. A close at that level would be the lowest since the debt was issued in 2005.

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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