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Mexican Peso Retreats as Fed Chairman Bernanke Cites Europe Risk

June 7 (Bloomberg) -- Mexico’s peso fell, reversing initial gains, as inflation quickened and Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is at risk from fiscal spending cuts and Europe’s debt crisis.

The peso depreciated 0.3 percent to 14.0678 per U.S. dollar at 4 p.m. in Mexico City. Earlier, the currency gained as much as 1.4 percent after China cut interest rates for the first time since 2008, a move that bolstered the outlook for global economic growth.

Mexico’s inflation rate rose for the first time in four months in May, climbing to 3.85 percent from 3.41 percent the month before, the national statistics institute reported. Bernanke warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law -- the so-called fiscal cliff -- would, if allowed to occur, pose a significant threat to the recovery.” Oil futures slipped after his comments.

The yield on Mexican local-currency bonds due in 2024 rose two basis points, or 0.02 percentage point, to 6.12 percent, the lowest level on a closing basis since August, according to data compiled by Bloomberg. The price fell 0.19 centavo to 133.83 centavos per peso.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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