Nov. 13 (Bloomberg) -- Mexico’s peso surged the most in eight weeks as testimony from President Barack Obama’s nominee to be the next head of the Federal Reserve damped speculation that U.S. policy makers will reduce stimulus next month.
The currency gained 1.2 percent to 13.0216 per dollar at 4 p.m. in Mexico City, posting the biggest advance since Sept. 18. Yields on fixed-rate government peso bonds maturing in 2024 were little changed at 6.3 percent, according to data compiled by Bloomberg.
The peso extended gains after Janet Yellen, nominated to be the next chairman of the Federal Reserve, said today in prepared remarks that the U.S. economy and labor market are performing “far short of their potential” and must improve before the Fed can begin reducing monetary stimulus. Speculation that the Federal Reserve may reduce its $85 billion in monthly bond purchases next month had been mounting since a U.S. Labor Department report showed last week that companies hired more workers than forecast in October.
“It seems that she has the view that the economy isn’t growing at the pace she would want,” Mario Copca, a currency and fixed-income strategist at said by phone from Mexico City. good for risky assets, that’s not good for emerging markets. So in the meantime that’s why you get these positive correlations to Treasuries. The peso rose on speculation “that as the head of the Fed she could maintain expansive policy for longer.”
Yellen’s comments came in remarks prepared for her nomination hearing tomorrow before the Senate Banking Committee.
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