Mexico Peso Rises on Speculation U.S. to Renew Stimulus Measures

Mexico’s peso strengthened for the first time in three days on speculation U.S. policy makers may renew stimulus measures.

The peso rose 0.4 percent to 14.3129 per dollar at 4 p.m. in Mexico City after falling to as low as 14.5997, the weakest intraday level since March 30, 2009. The currency dropped 2 percent since May 25 for a fifth weekly decline.

The currency reversed an earlier tumble as optimism grew that policy makers outside Mexico may take more action to spur global growth, according to Mario Copca, a currency strategist at Metanalisis SA. Mexico depends on exports for about 30 percent of its gross domestic product, sending 80 percent of them to the U.S.

“The market began to understand that the exchange rate reached a very attractive level, above all considering Mexico’s fundamentals,” Copca said by phone from Mexico City.

Federal Reserve Bank of Boston President Eric Rosengren said the central bank should spur growth and cut unemployment by prolonging a program that lengthens the average duration of bonds on its balance sheet. Continuing the so-called Operation Twist beyond this month would help the Fed meet its mandate to ensure full employment, Rosengren said in an interview with Bloomberg News before a report from the Labor Department that showed the pickup in the U.S. unemployment rate last month.

Peso volatility is “a phenomenon we have to live with,” central bank Governor Agustin Carstens said today during an event in Cancun, Mexico. The peso helps Mexico absorb shocks to the economy driven by external forces, and limiting its liquidity would be a mistake, he said.

U.S. Jobs

U.S. payrolls climbed by 69,000 last month, the Labor Department reported today in Washington. That was less than the most-pessimistic forecast compiled by Bloomberg after a revised 77,000 gain in April that was smaller than initially estimated. The median estimate of economists in a Bloomberg survey called for a 150,000 advance in May. The unemployment rate increased to 8.2 percent.

Mexico’s central bank intervened in the foreign-exchange market for the second time in two weeks yesterday, selling $107 million of reserves to slow the peso’s drop. It sold dollars for the first time since December 2009 on May 23.

Since November, the central bank has offered $400 million daily at an exchange rate that is at least 2 percent weaker than the previous day’s official fix level.

The peso’s earlier selloff “was very exaggerated,” Javier Benavides, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in a telephone interview. “It responded very badly to the nonfarm payroll data that came out in the morning.”

The yield on Mexican local-currency bonds due in 2024 fell five basis points, or 0.05 percentage point, to 6.21 percent, according to data compiled by Bloomberg. The price rose 0.56 centavo to 132.90 centavos per peso.

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