Mexico’s peso dropped to a 10-week low as a report showed that the U.S. economy expanded faster than forecast last quarter, adding to speculation that the Federal Reserve will reduce monetary stimulus next month.
The currency slipped 0.3 percent to 13.3594 per U.S. dollar at 4 p.m. in Mexico City, leaving it down 4.7 percent this month, the worst performance among Latin America’s major dollar counterparts in August. Yields on Mexico’s benchmark peso bonds due in 2024 fell five basis points, or 0.05 percentage point, to 6.36 percent today, according to data compiled by Bloomberg.
Mexico’s peso fell on concern that a tapering of the Fed’s $85 billion monthly bond purchases will pare capital flows into the Latin American country. Bets on reduced stimulus were fueled today by a report showing the U.S. economy grew at a 2.5 percent annualized rate in the second quarter, above analysts’ 2.2 percent median forecast.
“The market is now discounting that we’re very close to a reduction in stimulus,” Eduardo Rodriguez, a currency trader at Casa de Bolsa Finamex SAB, said in a telephone interview from Guadalajara, Mexico. “As long as there’s nothing convincing, like a statement from the Fed or very bad U.S. data, we’re going to continue with a relatively weak peso.”
Mexico’s central bank governor Agustin Carstens has asked the Fed to clarify plans for tapering. The Fed will pare its monthly bond purchases at its Sept. 17-18 meeting, according to 65 percent of economists surveyed by Bloomberg Aug. 9-13.