Mexico’s peso fell to its weakest since 2009, triggering an intervention from the central bank, after a poll showed gains by a presidential candidate who favors increased public spending and disappointing U.S. jobs reports.
The currency extended its monthly drop to 9.5 percent, making it the worst performer among the 16 major currencies tracked by Bloomberg. The peso weakened as Andres Manuel Lopez Obrador, who narrowly lost the 2006 election, moved to within four percentage points of frontrunner Enrique Pena Nieto in a poll published today by Reforma newspaper.
“Until now there has been almost no political risk priced in to Mexico from the elections, and this sparked the possibility in people’s heads,” Eduardo Suarez, a currency strategist at Bank of Nova Scotia, said by phone from Toronto.
The peso depreciated 1.6 percent to 14.3755 per dollar at 4 p.m. in Mexico City, after earlier touching 14.3829, its weakest level since March 30, 2009. The currency’s drop in May is the biggest since an 11 percent decline in September.
The tumble prompted the central bank to sell $107 million in a dollar auction designed to limit the peso’s volatility. Since November, it has been offering $400 million daily at an exchange rate that’s at least 2 percent weaker than the previous day’s official fix level. It sold $258 million on May 23 in the only other sale so far under the program.
Concern that Lopez Obrador won’t open the state-controlled oil industry to private investment for the first time since 1938 contributed to today’s currency selloff, Suarez said.
Lopez Obrador of the Democratic Revolution Party opposes changes to Mexico’s energy industry that Pena Nieto, the Institutional Revolutionary Party’s candidate, and Josefina Vazquez Mota, the candidate of President Felipe Calderon’s National Action Party, have said they favor.
In the poll published today by Mexico City-based Reforma, Lopez Obrador had support from 34 percent of 1,515 people surveyed May 24-27, up from 27 percent in a poll published April 25. Pena Nieto’s backing fell to 38 percent from 42 percent. Vazquez Mota had 23 percent, compared with 29 percent. Gabriel Quadri of the New Alliance Party had 5 percent, up from 2 percent. The poll had a margin of error of 2.9 percentage points and didn’t count respondents who told Reforma they had not yet decided whom to support.
The poll’s result “is due to the work we’ve been doing with the voters,” Cesar Yanez, a spokesman for Lopez Obrador, said in a phone interview. “There’s no one element” that contributed to the rise in the survey, he said.
An aide in Pena Nieto’s campaign countered that the survey was not taken by a polling company but by the newspaper and has not been published on a regular basis.
“They’ve published it whenever they thought it was convenient,” Jorge Carlos Ramirez, a vice coordinator of Pena Nieto’s campaign, said in an interview with Radio Formula. “We don’t need to be alarmed.”
U.S. Job Market
The peso also dropped today as U.S. reports showed jobless claims rose to a one-month high and companies added fewer positions than forecast. Mexico sends about 80 percent of its exports to the U.S.
Mexico’s central bank raised its 2012 growth estimate for Latin America’s second-biggest economy earlier this month to a range of 3.25 percent to 4.25 percent, up from 3 percent to 4 percent. The U.S. economic rebound may drive Mexico’s growth up further, central bank Governor Agustin Carstens said in an interview on May 18.
The yield on Mexican local-currency bonds due in 2024 rose six basis points, or 0.06 percentage point, to 6.27 percent, according to data compiled by Bloomberg. The price dropped 0.67 centavo to 132.34 centavos per peso.
U.S. gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a prior estimate of 2.2 percent expansion, revised Commerce Department figures showed today. The Mexican economy depends on exports for about 30 percent of its gross domestic product.
Companies in the U.S. added 133,000 jobs this month, ADP Employer Services reported today. The median forecast in a Bloomberg survey was for an increase of 150,000. First-time claims for jobless benefits rose by 10,000 to 383,000 in the week ended May 26, the Labor Department reported.
Major public opinion polls have been showing Pena Nieto’s lead sliding since thousands of students started marching against him in several cities. None have been this close, however.
Pena Nieto had 33.3 percent support and Lopez Obrador had 21.2 percent, according to a daily poll by Mexico City-based Grupo Economistas Asociados-ISA released yesterday. Vazquez Mota had 20.3 percent backing in the poll of 1,152 people taken May 28 to 30. It had a margin of error of 3 percentage points.