Mexico’s Peso Rises Most in Three Weeks on Signs of U.S. Accord

Mexico’s peso climbed the most in three weeks as speculation mounted that lawmakers in Washington will reach a deal to raise the U.S. debt limit, bolstering demand for the Latin American country’s higher-yielding assets.

The currency rose 0.7 percent to 13.0939 per dollar at 4 p.m. in Mexico City, the biggest gain on a closing basis since Sept. 18. Today’s advance pared the peso’s loss this year to 1.8 percent.

Emerging-market currencies rallied as U.S. House Republicans met amid reports that they will consider a short-term increase to the U.S.’s debt limit without policy conditions, potentially avoiding a showdown with President Barack Obama. The peso is advancing on speculation the two sides will reach a compromise before an Oct. 17 deadline, according to Maya Hernandez, a strategist at HSBC Holdings Plc.

“It’s the first sign of progress that we’ve seen in like 10 days,” Hernandez said in a telephone interview from New York. “The market is hopeful that it will at least bring the two sides closer.”

The currency sustained its gains after Standard and Poor’s said it was keeping its positive outlook on Mexico’s long-term credit ratings on the prospects President Enrique Pena Nieto’s economic reforms could boost growth, even as his tax overhaul is being watered down. S&P said it was still considering raising Mexico’s BBB rating, the second-lowest investment grade, on the prospect the country will gain fiscal flexibility.

“It’s in line with what the market is doing now,” Claudio Irigoyen, the head of Latin American fixed-income and foreign-exchange strategy at Bank of America Corp., said in a phone interview from New York. “The market is pricing in so far a relatively good energy reform, so if the reform doesn’t go through in line with what the market is expecting you can have a big disappointment and that’s really going to be bad for the bonds and the currency.”

Yields on Mexico’s peso bonds due December 2024 fell seven basis points, or 0.07 percentage point, to 5.97 percent, according to data compiled by Bloomberg.

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