Mexico’s Peso Advances as Federal Reserve Tapering Concern Eases

Mexico’s peso rose after Federal Reserve Chairman Ben S. Bernanke called for maintaining a U.S. monetary stimulus program that has boosted demand for the Latin American country’s securities.

The currency advanced 0.7 percent to 12.8061 per dollar at 4 p.m. in Mexico City. Yields on benchmark local-currency bonds due in 2024 declined 12 basis points, or 0.12 percentage point, to 5.77 percent.

Bernanke called yesterday for maintaining the asset purchases, saying in response to a question after a speech that “highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.” The minutes of the U.S. central bank’s June meeting published yesterday showed that many of the policy makers wanted to see more signs that employment is improving before scaling back bond buying.

Bernanke’s comments “caused the peso to increase because of our rates, because of our rate differential,” Eduardo Rodriguez, a currency trader at Casa de Bolsa Finamex SAB, said in a telephone interview from Guadalajara, Mexico.

The yield on Mexico’s 2024 bonds has risen 1.29 percentage points from a record low on May 9 amid investor concern that the Fed will scale back stimulus. Foreign investors had boosted peso debt holdings to a record high earlier this year in part to profit from Mexico’s higher rates.

All 23 analysts surveyed by Bloomberg are projecting that Mexican policy makers will keep the benchmark interest rate at 4 percent tomorrow, compared with near-zero benchmark borrowing costs in the U.S. and other developed nations.

Bernanke said that while the Fed’s bond buying has made progress in achieving the goal of “a substantial improvement in the outlook for the labor market in the context of price stability,” efforts “still have further to go.”

First-time U.S. jobless claims rose by 16,000 to 360,000 in the week ended July 6 from a revised 344,000, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 340,000.

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