Mexican Peso Rallies on Fed as Broader Energy Reform Proposed

Mexico’s peso rebounded from a three-week low amid speculation that the Federal Reserve will maintain record U.S. monetary stimulus.

The currency appreciated 0.3 percent to 13.1228 per U.S. dollar at 9:44 a.m. in Mexico City, according to data compiled by Bloomberg. The peso closed yesterday at its weakest level since Oct. 9. Yields on benchmark peso bonds maturing in 2024 fell one basis point, or 0.01 percentage point, to 6.15 percent, according to data compiled by Bloomberg.

The peso gained along with most emerging-market currencies today as two papers published by top Fed officials argued that the level of slack in the economy justifies an accommodative stance, helping quell speculation that policy makers will move quickly to wind down their $85 billion-a-month bond purchases.

“It’s really being driven by what’s going on in the U.S., maybe to a lesser extent Europe,” Win Thin, global head of emerging-market strategy at Brown Brothers Harriman & Co., said in a phone interview from New York. “At the current levels it’s probably a little bit undervalued.”

The peso, which slumped the most in two months yesterday, may gain should lawmakers approve legal changes to open up the energy industry more than the government first proposed in August, according to Nomura Holdings Inc.

President Enrique Pena Nieto is seeking to end a 75-year-old state monopoly on pumping crude and to attract investment from companies like Exxon Mobil Corp. and Chevron Corp. The government says the plan would boost growth by 1 percentage point by 2018.

Mexico’s two largest parties have reached a preliminary accord that would give oil producers more control over some projects than the original proposal would have allowed, according to three people with direct knowledge of the agreement.

“The market is simply not looking at the huge potential impact if the energy bill ends up including a production-sharing agreement or even licenses,” Benito Berber, a Nomura strategist, wrote in a note to clients today.

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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