Mexico’s peso fell the most since May as concern that Europe’s debt crisis is growing more acute damped demand for higher-yielding assets.
The peso dropped 1.7 percent, the most since May 30, to 13.5877 per dollar. The loss pared its rally this year to 2.5 percent, the second-biggest among the most-traded currencies tracked by Bloomberg. It touched 13.5887 in intraday trading, the weakest level since June 29. Mexico’s central bank sold $281 million today in a dollar auction designed to limit the peso’s volatility.
Most emerging-market currencies tumbled before a meeting of Greece’s creditors this week. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. Speculation that the European crisis would hurt the market for Mexican exports helped make the peso Latin America’s worst-performing major currency in 2011.
“It’s just risk aversion,” said Gabriel Casillas, the chief economist and head of research at Grupo Financiero Banorte SAB. The currency’s liquidity and high-trading volumes mean that “whenever you want to reduce risk in emerging markets the peso is always a very easy way to do it,” he said by phone from Mexico City.
The central bank sold dollars for an average 13.5607 pesos each, according to its website. 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. Today’s sale was the biggest since the nation’s currency exchange commission announced the program on Nov. 29. The bank sold $107 million on May 31 and $258 million on May 23 in the only other two sales so far under the program.
The yield on Mexican local-currency bonds due in 2024 rose five basis points, or 0.05 percentage point, to 5.15 percent, according to data compiled by Bloomberg. The price fell 0.55 centavo to 144.4 centavos per peso.