Mexico Peso Climbs to Strongest Since 2008 on IMF Credit Line

Mexico’s peso rose to the strongest level since October 2008 as the International Monetary Fund approved the largest credit line in the institution’s history, bolstering confidence in the nation’s economy.

The peso climbed 0.7 percent to 12.1348 per dollar at 5 p.m. New York time, the strongest level since Oct. 6, 2008, from 12.2141 yesterday. The currency has gained 1.7 percent this year against the dollar, the best performer among the 16 major currencies tracked by Bloomberg.

The IMF approved a $72 billion flexible credit line for two years yesterday, replacing a $48 billion line that expires in April. The Washington-based lender first approved the credit in 2009, to boost market confidence in the Mexican economy, which contracted 6.1 percent that year.

“This is a cheap way of accumulating reserves and it’s good for the peso,” said Ramon Cordova, a currency trader at Base Internacional Casa de Bolsa SA in Monterrey, Mexico. “It’s a vote of confidence and it tells you that Mexico has solid fundamentals.”

Mexico has been selling $600 million in dollar options monthly, allowing it to purchase dollars to boost foreign reserves after the peso reached a record low in 2009. Foreign reserves rose to a record $116.9 billion in the week ending Jan. 7, the central bank said in a statement today. This month, traders have triggered $595 million of the available dollar options.

The yield on Mexico’s 10 percent bond due 2024 rose 3 basis points, 0.03 percentage point, to 7.40 percent, according to Banco Santander SA. The price fell 0.26 centavo to 122.52 centavos per peso. The yield reached the highest since Dec. 15.

Bond Yields

Mexican bond yields will remain “very low” this year, Finance Minister Ernesto Cordero said in Mexico City today. The yield on the benchmark bond fell as much as 201 basis points to 6.258 last year. The yield later climbed on concerns the U.S. economic recovery was slowing and the European debt crisis may spread, pushing yields to 7.174 percent on Dec. 31

Mexico’s economy may grow 3.7 percent this year after growth of 5.1 percent last year, according to the median estimate of 13 analysts surveyed by Bloomberg.

Industrial production rose 5.3 percent in November, the national statistics agency said today, beating the median estimate of 3.8 percent among analysts surveyed by Bloomberg.

Automobile exports climbed 6.6 percent to 147,552 in December, the nation’s Automobile Industry Association said. Auto production rose 12 percent and sales gained 14 percent.

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