Mexico Peso Posts Quarterly Loss as U.S. Outweighs Reform Agenda

Mexico’s peso fell this quarter as President Enrique Pena Nieto’s push to bolster growth through legal reforms failed to overshadow concern about the U.S. economy and the Federal Reserve’s monetary stimulus.

The currency weakened 1.2 percent this quarter against the U.S. dollar after rising 0.4 percent today. The yield on benchmark government debt maturing in 2024 rose three basis points, or 0.03 percentage point, to 6.08 percent today, according to data compiled by Bloomberg.

Speculation on when the Federal Reserve will begin to slow its pace of monetary stimulus and concern over whether U.S. lawmakers will reach a budget agreement has been causing peso swings, Rafael Camarena, an economist at Grupo Financiero Santander Mexico SAB, said in a telephone interview. The currency fell this quarter even as President Enrique Pena Nieto presented plans to bolster growth by opening the state-owned oil industry and boosting tax collection.

“We’d have to see more advances in the discussion around the reforms to see the peso separate itself a bit from this external volatility,” Camarena said by phone from Mexico City.

While foreign investors boosted holdings of local-currency, fixed-rate government bonds to a record in May, the debt slumped this quarter as Pena Nieto’s proposals for legal changes didn’t go as far as some investors had hoped and the government cut its 2013 growth forecast.

The government on Aug. 20 reduced its forecast for this year’s economic growth to 1.8 percent, from a May 17 estimate of 3.1 percent. Pena Nieto said earlier this year that passage of his legislative agenda, which includes constitutional amendments to open the state-owned oil industry to more private investment and increase tax collection, could spur annual growth to as much as 6 percent.

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