Mexico Peso Drops for Sixth Day Amid Concern Over Fiscal Cliff
Mexico’s peso fell for a sixth day amid mounting concern that politicians in Washington won’t be able to reach a budget agreement, damping growth in the Latin American country’s biggest trading partner.
The peso declined 0.2 percent to 13.2773 per dollar at 4 p.m. in Mexico City. The depreciation reduced gains this year to 5 percent.
Investors are waiting to see if Congress will act to avoid $607 billion in automatic spending cuts and tax increases scheduled to take effect starting in January. While President Barack Obama has signaled willingness to compromise, neither he nor top congressional Republicans have publicly offered any concessions.
“Markets continue with uncertainty,” Mario Copca, a currency strategist at Metanalisis SA, said by phone from Mexico City. “Obama wasn’t able to stop it.”
The U.S. president said today it would be “very difficult” to cut the deficit by curbing breaks in the tax code without raising rates. Some Republicans have called instead for closing tax loopholes and lowering rates. Failure to reach an agreement to avoid the so-called fiscal cliff risks pushing the U.S., the destination for about 80 percent of Mexican exports, back into a recession.
Yields on Mexico’s peso bonds due in 2022 rose two basis points, or 0.02 percentage point, to 5.38 percent, according to data compiled by Bloomberg. The price fell 0.19 centavo to 108.34 centavos per peso.
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