Mexico’s peso posted its second consecutive weekly drop as $85 billion of spending cuts were set to be triggered in the U.S., the Latin American nation’s biggest export market.
The currency fell 0.4 percent this week. It increased 0.2 percent at 12.7584 per dollar at 4 p.m. in Mexico City today after dropping as much as 0.7 percent in intraday trading. The peso has rallied 0.7 percent in 2013.
Democrats and Republicans in the U.S. are wrangling over how to to replace the cuts worth $1.2 trillion over nine years, including $85 billion that would occur this fiscal year. Mexico sends about 80 percent of its exports to the U.S.
“If this isn’t resolved quickly we’re going to see prices very close to 13” pesos per dollar, Roberto Galvan, a currency trader at Intercam Casa de Bolsa SA in Mexico City, said in a telephone interview today. “We’re watching this closely.”
In a speech today at the White House, President Barack Obama called on Congress to halt the “slow grind” on the economy caused by the automatic spending cuts. Obama is scheduled to order federal departments and agencies today to begin cutting their budgets.
House Speaker John Boehner, a Republican, said the U.S.’s lower chamber will vote next week on legislation to fund the government for the rest of the fiscal year so Congress won’t have to deal with the risk of a government shutdown while negotiating on cutting the deficit.
The peso pared its earlier losses and heading for gains after a report showed that manufacturing in the U.S. expanded at a faster pace than forecast in February.
The Institute for Supply Management’s factory index advanced to 54.2, from 53.1 in January, the Tempe, Arizona-based group said today. The figures exceeded the most optimistic forecast in a Bloomberg survey in which the median projection was 52.5. A reading greater than 50 signals expansion.
Yields on peso bonds due in 2024 declined three basis points to 5.08 percent, according to data compiled by Bloomberg. The price rose 0.26 centavo to 143.56 centavos per peso.