Mexican Peso Advances the Most in Week on Increased Risk Demand

Mexico’s peso rose the most in a week as speculation that European leaders will make progress in resolving the region’s debt crisis fueled demand for the Latin American country’s higher-yielding assets.

The peso climbed 0.5 percent to 13.6329 per U.S. dollar at the close in Mexico City, from 13.6968 yesterday. The currency has gained 2.2 percent in 2012, after posting the worst performance among Latin America’s major currencies last year.

A meeting yesterday between German Chancellor Angela Merkel and French President Nicolas Sarkozy is helping spur the global risk appetite that’s driving peso gains, said Rafael Camarena, an economist at Banco Santander SA in Mexico City. Merkel and International Monetary Fund Managing Director Christine Lagarde discussed Greece during a meeting today, Steffen Seibert, the German leader’s chief spokesman, said in a text message, and “renewed their commitment to the goal of strengthening growth and employment in Europe in a sustainable way.”

“Today Europe woke up optimistic,” Camarena said by phone. “If Europe gets a bit better it diminishes a little bit the perception of global risk that’s been affecting emerging-market currencies such as the peso.”

The peso’s rise is also being driven by speculation Mexican policy makers won’t change the benchmark 4.5 percent interest rate when they meet later this month, Camarena said.

“With the inflation data we saw yesterday in Mexico, obviously there are no expectations for a change in the interest rate in this central bank meeting,” he said.

Consumer Prices

Mexico’s consumer prices jumped more than analysts forecast in December, pushing annual inflation to the fastest in 12 months. Consumer prices climbed 0.82 percent from November, boosting the annual rate to 3.82 percent, the national statistics agency said yesterday on its website.

The yield on Mexico’s benchmark peso-denominated bond due in 2024 fell three basis points, or 0.03 percentage point, to 6.55 percent, according to data compiled by Bloomberg. The price of the security rose 0.29 centavo to 129.96 centavos per peso.

Mexico sold all 10 billion pesos of 28-day Cetes and 11 billion pesos of the 91-day securities it offered today, the central bank said on its website. Mexico also sold all 8.5 billion pesos in 182-day bills and 9.5 billion pesos of 336-day Cetes it auctioned today, the bank said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE