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Mexico Peso Falls as U.S. Budget Concern Damps Export Outlook

Dec. 19 (Bloomberg) -- Mexico’s peso dropped for the first time in four days on concern U.S. political leaders are struggling to agree on a budget deal for the Latin American country’s biggest trading partner.

The currency depreciated 0.4 percent to 12.7664 per U.S. dollar at 4:30 p.m. in Mexico City, according to data compiled by Bloomberg. The currency has rallied 9.2 percent this year, still the biggest advance among the dollar’s 16 most-traded counterparts.

The peso dropped as a spokesman for President Barack Obama said he would veto a budget proposal from House Speaker John Boehner. The Congressional Budget office has said spending cuts and tax increases that will go into effect next month if a deal isn’t reached may cause a recession. The U.S. is the destination for 80 percent of Mexico’s exports.

“Until they finalize a deal, there’s going to be this cloud of uncertainty of how the U.S. economy will react to any fiscal adjustment,” Italo Lombardi, an economist at Standard Chartered Bank, said in an e-mailed response to questions. “And this obviously impacts Mexico.”

The Mexican government plans to sell an average of 5 billion pesos per week in 28-day bills, known as Cetes, during the first quarter of 2013, the Finance Ministry said in an e-mailed statement. It also will sell an average of 7 billion pesos per week in 91-day notes. The government will also auction 9 billion pesos of six-month notes every week and 9.5 billion pesos of one-year notes every four weeks.

Yields on peso-denominated bonds due in 2024 rose two basis points, or 0.02 percentage point, to 5.52 percent today, according to data compiled by Bloomberg.

To contact the reporter on this story: Ben Bain in Mexico City at bbain2@bloomberg.net

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

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