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Mexico’s Peso Surges as Fed Stimulus Bolsters Bonds and Stocks

Mexico’s peso surged to a one-month high as the Federal Reserve refrained from paring the $85 billion pace of monthly bond buying, a stimulus program that’s fueled demand for the Latin American nation’s securities.

The currency strengthened 1.1 percent to 12.7781 per U.S. dollar at 1:22 p.m. in Mexico City, reversing losses of as much as 0.5 percent. Yields on peso bonds maturing in 2024 tumbled 18 basis points, or 0.18 percentage point, to 5.95 percent, according to data compiled by Bloomberg.

The peso had fallen 4.5 percent since Fed Chairman Ben S. Bernanke said on May 22 that the U.S. may taper monthly asset purchases. Foreign holdings of fixed-rate government bonds rose to a record in May before speculation began to mount that a reduction in U.S. stimulus was imminent.

“Valuations are cheap, especially since the taper did not come,” Alejandro Urbina, who helps oversee $800 million at Silva Capital Management LLC including Mexican government bonds, said in an e-mailed response to questions. “Bond yields will tighten and the peso should strengthen.”

Mexico’s benchmark IPC stock index of 35 companies rose 1.1 percent, the most in a week.

To contact the reporters on this story: Ben Bain in Mexico City at bbain2@bloomberg.net; 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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