Mexico’s peso rose the most among major Latin American counterparts as Pacific Investment Management Co.’s Bill Gross called it a “great currency.”
Gross, the founder of the world’s biggest bond-fund manager, cited Mexico’s low levels of debt and the stability of its target lending rate in a Twitter post today extolling the peso. The central bank has kept benchmark borrowing costs at a record low 4.5 percent for 32 consecutive meetings.
The currency appreciated 0.6 percent to 12.6316 per U.S. dollar at 4 p.m. in Mexico City, extending its advance this year to 1.8 percent after Gross said the peso “looks good.”
“The market knows that Pimco is one of the biggest holders of Mexican bonds and therefore pesos,” Ramon Cordova, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said in a telephone interview.
The market has been aware of Gross’s fondness for the peso for “a long time,” according to Cordova.
On June 19, Newport Beach, California-based Gross wrote on the Pimco Twitter account that Mexico’s lower debt levels and higher yields made investing in the country’s bonds instead of German securities an obvious decision. The peso has rallied 9.5 percent since the comments, the biggest advance among the dollar’s 16 most-traded counterparts after the Swedish krona.
The International Monetary Fund projected in April that Mexico’s government debt will equal 43 percent of gross domestic product this year, versus 110 percent for the U.S., 77 percent in Germany and 91 percent for the euro area.
The currency is also recovering from yesterday’s 0.8 percent rout, when it followed stocks lower amid renewed concern Europe’s debt crisis will intensify. The S&P 500 plummeted 1.2 percent yesterday, the most since Nov. 14.
There is “diminished” probability of a significant weakening in the peso, Nomura Holdings Inc. strategist Benito Berber said today in a research report to clients. The central bank will reduce its benchmark rate by 0.5 percentage point during the second half of this year, Berber said.
Berber said in a telephone interview that policy makers won’t cut the rate if the currency weakens beyond 13 pesos per U.S. dollar, inflation increases above 3.5 percent or if growth tops 3.5 percent this year.
Mexico’s currency gained earlier as European companies from Munich Re to BP Plc reported earnings that exceeded analysts estimates, easing concern that sovereign-debt turmoil will further slow global economic growth.
A buildup of gas led to the deadly blast last week at the headquarters of state-owned oil company Petroleos Mexicanos, Attorney General Jesus Murillo told reporters at a press conference in the nation’s capital last night. There were no signs of any explosives at the scene, he said.
Yields on peso bonds due in 2022 fell one basis point, or 0.01 percentage point, to 5.02 percent, according to data compiled by Bloomberg. The price rose 0.05 centavo to 111.03 centavos per peso. Yields on Pemex dollar bonds due in 2022 rose three basis points to 3.57 percent.