Mexico’s Peso Advances for Fourth Day After U.S. GDP RevisionBen Bain
Mexico’s peso rose for a fourth day as U.S. growth that was slower than previously estimated damped speculation the Federal Reserve will reduce a stimulus program that has fueled demand for the Latin American country’s debt.
The currency climbed 0.4 percent to 13.1638 per U.S. dollar at 4 p.m. in Mexico City. Today’s rally pared the loss this quarter to 6.3 percent. Yields on government bonds maturing in 2042, the nation’s longest-dated peso debt, fell two basis points, or 0.02 percentage point, to 7.41 percent. It was the first drop since June 14.
Fed Chairman Ben S. Bernanke sapped demand for Mexico securities on June 19 when he said policy makers may start tapering their bond-buying program known as quantitative easing, or QE.
“There is always a disproportionate impact because of the liquidity of the peso and the peso market,” Pedro Tuesta, senior Latin America economist at 4Cast Ltd., said in a telephone interview from Washington. “The GDP numbers came in weaker than expected so the market believes now that maybe the Fed will not taper QE as early as they were expecting. So rates go down, the peso goes up.”
U.S. gross domestic product expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent, figures from the Commerce Department showed today. Mexico sends about 80 percent of its exports to its northern neighbor.
The peso extended gains today after Fed Bank of Richmond President Jeffrey Lacker, who doesn’t vote on the Federal Open Market Committee this year, said he expects the U.S. expansion to remain “sluggish” for “a couple more years” and that the central bank isn’t close to reducing its bond holdings.
Mexico’s national statistics agency said today that exports declined 0.9 percent in May from a year earlier to $32.8 billion.