Mexico Peso Rises as U.S. Budget Talks Boost Export Outlook

Mexico’s peso rose to a three-month high amid speculation that U.S. politicians will reach a budget deal that averts an economic slowdown in the country that’s the biggest buyer of the Latin American nation’s exports.

The peso increased 0.2 percent to 12.7205 per U.S. dollar at 4 p.m., its strongest closing level since Sept. 14. Its rally this year of 9.6 percent is the biggest among the greenback’s 16 most-traded counterparts.

Mexico’s peso reversed earlier losses and gained as investors weighed prospects for a budget deal in the U.S., the destination of 80 percent of the Latin American country’s exports. President Barack Obama and U.S. House Speaker John Boehner met today in the White House as they struggle to reach a budget agreement to avoid more than $600 billion in automatic tax increases and spending cuts scheduled to start Jan. 1.

The prospects for a deal drove the peso to erase earlier losses which were fueled by a report that showed manufacturing in New York, northern New Jersey and southern Connecticut slowed more than expected in December, Mario Copca, a strategist at Metanalisis SA in Mexico City, said in a phone interview. “Whatever comments from a congressperson or from the White House are going to keep creating volatility.”

Obama is considering a possible budget concession on Social Security cost-of-living increases after Boehner dropped his opposition to raising tax rates for some top earners, said two people familiar with the talks. If officials fail to reach agreement, the spending cuts and tax boosts may result in a recession next year, according to the Congressional Budget office.

The Fed New York manufacturing index, released today, dropped to minus 8.1 this month, from minus 5.2 in November. The median forecast of 55 economists surveyed by Bloomberg called for minus 1.

Yields on Mexico’s peso bonds due in 2024 rose one basis point, or 0.01 percentage point, to 5.47 percent, according to data compiled by Bloomberg. The price fell 0.12 centavo to 139.75 centavos per peso.

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