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Mexico Peso Drops as Global Growth Concerns Boost Risk Aversion

Mexico’s peso posted its first decline in three days as U.S. jobless claims increased and the head of the European Central Bank said threats to the euro region’s economy have “intensified.”

The peso weakened 0.4 percent to 12.5146 per U.S. dollar at 5 p.m. New York time, from 12.4638 yesterday. The currency has fallen 1.4 percent this year, the second-worst performing major Latin American currency tracked by Bloomberg after Argentina’s peso.

Jobless claims in the U.S., Mexico’s biggest trading partner, rose by 2,000 to 414,000 in the week ended Sept. 3, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. The euro region’s economy faces “particularly high uncertainty and intensified downside risks,” ECB President Jean-Claude Trichet said at a press conference in Frankfurt today.

The peso is “merely tracking the slightly risk-cautious tone right now,” said Paul Biszko, an emerging-markets strategist at RBC Capital in Toronto. “The ECB maybe wasn’t as dovish as some had anticipated, and the U.S. jobless claims data came in a little bit weaker. There are a lot of even risks in the next few days so people are still very cautious.”

ECB officials meeting in Frankfurt today kept the benchmark rate at 1.5 percent, as predicted by all 57 economists in a Bloomberg News survey.

Nineteen of 25 major emerging-market currencies tracked by Bloomberg declined against the dollar.

Economist Forecasts

Economists from Goldman Sachs Group Inc. to HSBC Holdings Plc are forecasting the peso will reverse the decline and gain 4.7 percent by year-end to 11.90 per dollar, according to the median estimate of 23 analysts in a Sept. 6 survey by Citigroup Inc.’s Banamex unit.

“The peso is well-anchored, strong,” Mexico’s central bank Governor Agustin Carstens said today in an interview with Mexico City-based Radio Formula. “Its value in the medium- and long-term is anchored by our macroeconomic strength.”

The yield on Mexico’s benchmark peso-denominated bond due in 2024 declined 11 basis points, or 0.11 percentage point, to 6.24 percent, according to Banco Santander SA data. The price of the security rose 1.20 centavo to 133.88 centavos per peso.

Traders didn’t trigger any of the dollar options available today, the central bank said on its website. The bank has been buying as much as $600 million through the options every month since March 2010 to bolster foreign reserves. They allow the central bank to accumulate dollars, insuring against outflows of capital and limiting the peso’s appreciation.

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