Mexico Peso Drops to One-Year Low as Fed Stimulus Concern Mounts

Mexico’s peso fell to its weakest level in a year as speculation mounted that the Federal Reserve will begin this month to reduce record monetary stimulus that has fueled flows into the Latin American country’s debt.

The peso depreciated 0.6 percent to 13.3896 per U.S. dollar at 4 p.m. in Mexico City, the weakest closing level since July 2012. Yields on peso bonds maturing in 2024 increased seven basis points, or 0.07 percentage point, to 6.56 percent, according to data compiled by Bloomberg.

Mexico’s peso securities have retreated with the rest of emerging markets amid concern an improving U.S. economy will prompt the Fed to reduce its $85 billion monthly bond purchase program. U.S. Labor Department data showed today that jobless claims declined more than forecast last week. Mexico sends about 80 percent of its exports to the U.S.

“Right now, it’s all about what the Fed is doing,” Eduardo Suarez, Latin America currency strategist at Bank of Nova Scotia, said in a phone interview from Toronto.

Fed officials, set to meet Sept. 17-18, are watching the job market along with other economic data to evaluate the pace of asset buying. The U.S. central bank will reduce its monthly purchases at its meeting this month, according to 65 percent of economists in a Bloomberg survey last month.

Mexico’s central bank said today that a survey by the Bank for International Settlements in April showed that the peso was the world’s most-traded emerging market currency.

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