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Mexico’s Peso Slumps After Retail Sales Drop by Most Since 2010

Mexico’s peso fell after a report showed that retail sales fell in December by the most in three years, damping the outlook for growth in Latin America’s second-biggest economy.

The peso fell 0.2 percent to 12.7464 per U.S. dollar at 4 p.m. in Mexico City. The currency has advanced 0.8 percent this year.

The peso extended losses in earlier trading after the national statistics agency said today that Mexico’s retail sales fell 1.8 percent in the final month of 2012 from the year-earlier period, the biggest annual drop since the country was emerging from recession in January 2010. Today’s drop in the peso follows an 0.8 percent slide yesterday, when Federal Reserve minutes indicated a debate over further stimulus in the U.S., the biggest market for Mexican exports.

“Disappointing retail sales have boosted the Mexico peso’s negative trend started by the Fed minutes,” Eduardo Suarez, a Latin America foreign-exchange strategist at Bank of Nova Scotia in Toronto, said in an e-mailed response to questions.

Slowing inflation and concern that growth is stalling have fueled speculation that Banco de Mexico may cut interest rates this year. Nineteen of 20 economists forecast the central bank will reduce the benchmark rate this year, according to a survey by Citigroup Inc.’s Banamex unit released yesterday. The median estimate was for a 0.5 percentage point cut in April, the survey showed.

The yield on Mexican local-currency bonds due in 2024 fell two basis points, or 0.02 percentage point, to 5.08 percent, according to data compiled by Bloomberg. The price increased 0.27 centavo to 143.68 centavos per peso.

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