Mexico’s Peso Falls as Energy Reform Letdown Adds to Fed Concern

Mexico’s peso fell on speculation the U.S. Federal Reserve will curb record stimulus and after President Enrique Pena Nieto’s energy bill contained fewer incentives for private oil companies than a rival proposal.

The peso declined 0.6 percent to 12.7629 per U.S. dollar at 9:15 a.m. in Mexico City, the most among major Latin American currencies after Chile’s peso. The Mexican currency has retreated 1.1 percent in the past two days.

Speculation is growing that the Federal Reserve will start tapering record stimulus after U.S. retail sales rose in July for a fourth consecutive month, helping prompt the dollar to strengthen against all 16 of its most-traded counterparts. The peso is also reacting to Pena Nieto’s energy reform proposal yesterday, which contained fewer incentives for private oil companies than his main political rival party had put forth.

“The move signals slight disappointment over the details of the proposal, with investors probably expecting a more aggressive plan,” Juan Carlos Alderete, a strategist with Grupo Financiero Banorte SAB, said in an e-mailed report today.

Some investors also may have sold the peso after a run-up in prices as a result of prior optimism over the possible contents of the bill, Alderete said. The peso rallied 5.9 percent from a 10-month low on June 20 through last week, the most among developing nation currencies tracked by Bloomberg.

Pena Nieto’s plan would limit producers to profit-sharing contracts that provide less control over the oil than concessions proposed by the largest opposition party, the National Action Party.

The 0.2 percent increase in U.S. retail sales followed a 0.6 percent gain in June that was larger than previously reported, according to Commerce Department figures issued today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.3 percent advance.

To contact the reporter on this story: Jonathan Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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