Mexico’s Peso Drops for First Time in Four Days on Rate Outlook

March 6 (Bloomberg) -- Mexico’s peso fell for the first time in four days on speculation policy makers will lower benchmark borrowing costs as soon as this week.

The peso depreciated 0.6 percent to 12.7828 per U.S. dollar at 4 p.m. in Mexico City. The currency has dropped 1.5 percent since Banco de Mexico indicated on Jan. 18 that a reduction in the 4.5 percent target lending rate “may be advisable” if inflation keeps slowing.

Today’s peso drop is “probably mostly due to the rate decision,” Aryam Vazquez, an economist at Wells Fargo & Co., said in an e-mailed response to questions. “Growth concerns, whether related to the U.S. or Mexico, are an important factor in determining rate expectations.”

Orders to U.S. factories fell 2 percent in January, the most in five months, the Commerce Department reported today in Washington. Mexico sends about 80 percent of its exports to its northern neighbor.

Mexico’s central bank will hold its target lending rate at a record low for a 33rd meeting on March 8, according to the median forecast of economists surveyed by Bloomberg.

Yields on peso bonds due in 2024 fell three basis points, or 0.03 percentage point, to 5.01 percent today, according to data compiled by Bloomberg. It’s the lowest closing level since the debt was issued in 2005. The price rose 0.39 centavo to 144.41 centavos per peso today.

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