Mexico’s peso fell to a two-month low as investors globally pared demand for higher-yielding assets amid concern over possible military action in Syria and a reduction in U.S. stimulus.
The currency fell 1.2 percent to 13.35 per U.S. dollar at 9:29 a.m. in Mexico City, leading declines today among the dollar’s 16 most-traded counterparts after tumbling 1.7 percent yesterday. Yields on Mexico’s benchmark peso bonds due in 2024 rose four basis points, or 0.04 percentage point, to 6.3 percent today, according to data compiled by Bloomberg.
Most major emerging-market currencies fell today after Secretary of State John Kerry said the U.S. will hold Syria’s government accountable for using chemical weapons, fanning concern unrest may disrupt Middle East oil supplies. Yesterday, the peso plunged after Federal Reserve policy makers indicated they won’t take into account the fallout in emerging markets as they pare back U.S. monetary stimulus.
“Investors are still very nervous and skittish and liquidity is light,” Clyde Wardle, a strategist at HSBC Holdings Plc, said in a telephone interview from New York. “It seems to be a number of items instead of one dominating theme.”
Wardle said that teacher demonstrations in Mexico, which have limited access to major roads in the capital over the past week, sparked concern that there may be protests against proposals to open up the country’s energy industry to more private investment. Lawmakers are poised to start debating the energy bills next month. The teachers are protesting a law that would require them to undergo standardized evaluations.
Yields on Mexico’s benchmark bonds touched a record low on May 9 in part on expectations that President Enrique Pena Nieto will succeed in passing legal reforms to boost growth. Since then they have surged 1.82 percentage points on speculation the Fed will trim its $85 billion in monthly bond purchases as U.S. job growth improves.
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