Mexico Peso Rises to Two-Week High on U.S. Budget Deal Prospect

Mexico’s peso climbed to a two-week high on speculation U.S. politicians will agree to raise the debt ceiling, easing concern that their budget impasse will stall the Latin American nation’s biggest export market.

The currency gained 0.8 percent to 12.9925 per U.S. dollar at 4 p.m. in Mexico City, the strongest level on a closing basis since Sept. 24. The peso rose 0.7 percent this week.

“If concern eases about what’s happening with the U.S. government, this will be positive for the peso,” Ramon Cordova, a trader at Banco Base SA, said in a telephone interview from San Pedro Garza Garcia, Mexico.

The peso has declined 1.4 percent in the past three months, the worst performance among major dollar counterparts tracked by Bloomberg, amid signs of economic weakness.

The International Monetary Fund cut its 2013 growth forecasts for Mexico this week to 1.2 percent from 2.9 percent in the previous report. That is below the central bank’s outlook for 2 percent to 3 percent growth for 2013. Growth will accelerate to 3 percent next year, the IMF forecasts.

Industrial production fell 0.7 percent in the 12 months through August, the national statistics agency reported today. The median forecast of analysts surveyed by Bloomberg was for an increase of 0.1 percent.

In the U.S., President Barack Obama held talks with House Republicans yesterday, fueling speculation that they will agree to extend the nation’s borrowing authority while remaining at odds over terms for ending the partial government shutdown. Mexico sends 80 percent of its exports to its northern neighbor.

Yields on Mexico’s peso bonds due in December 2024 fell eight basis points, or 0.08 percentage point, to 5.89 percent today, according to data compiled by Bloomberg. The yields have declined four basis points this week.

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