Mexican Currency Swings Drop to Three-Week Low on Foreign Demand

Volatility in Mexico’s peso fell to a three-week low as foreign investors poured money into the country’s higher-yielding assets, supporting the currency.

One-month historical volatility, a gauge of the magnitude of the peso’s fluctuations over the period, fell to its lowest level since March 11, according to data compiled by Bloomberg. The peso depreciated 0.3 percent to 12.3642 per dollar at 3 p.m. in Mexico City. The currency has rallied 4 percent in 2013, the biggest increase among 16 major dollar counterparts tracked by Bloomberg.

Volatility in the peso has been falling as global investors pile into the country’s bonds, seeking higher yields after policy makers indicated last month that their first interest-rate cut since 2009 was a one-off reduction.

“In periods of risk-off, you’re not seeing the currency reacting as it used to,” Roberto Torres, the head of peso trading at BNP Paribas, said by phone from New York.

The most recent data from the central bank show the percentage of fixed-rate government bonds held by global investors is holding at almost a 13-year high of 56 percent. Foreign ownership is likely to continue to rise, Nick Chamie, the global head of foreign-exchange strategy at Royal Bank of Canada, said in a research note to clients.

The central bank said today that remittances sent from abroad fell 11.1 percent in February from the same month a year earlier. Money sent home from Mexicans living abroad is historically the country’s largest source of foreign income after automobile and oil exports.

Yields on peso-denominated bonds due in 2024 declined one basis point, or 0.01 percentage point, to 5 percent today, according to data compiled by Bloomberg. The price rose 0.11 centavo to 144.31 centavos per peso.

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