Mexico’s Peso Declines as Fed Concern Overshadows Export OutlookBen Bain
Mexico’s peso fell as the International Monetary Fund boosted global growth forecasts, fueling speculation U.S. policy makers will quickly cut stimulus that has fueled demand for the Latin American country’s assets.
The peso depreciated 0.3 percent to 13.2728 per U.S. dollar at 4 p.m. in Mexico City. Yields on peso bonds due in 2024 rose four basis points, or 0.04 percentage point, to 6.47 percent, according to data compiled by Bloomberg. The price fell 0.42 centavo to 127.50 centavos per peso.
While the peso has historically benefited from a better growth outlook for the U.S., improvement in the Latin American country’s chief export market is adding to concern that the Federal Reserve will reduce monthly bond purchases. The IMF reported today that U.S. gross domestic product will expand 2.8 percent this year, compared with October’s 2.6 percent outlook.
“There may be some more determination to reduce stimulus,” Eduardo Rodriguez, a trader at Casa de Bolsa Finamex SAB, said in a telephone interview from Guadalajara, Mexico. “In the very short term, the only thing that you’re seeing is the return of interest rates.”
The U.S. central bank will pare its $75 billion in monthly purchases in $10 billion increments over the next six meetings before announcing an end to the program no later than December, according to the median forecasts of economists in a Bloomberg survey this month.
The peso will strengthen to 12.6 per dollar by the end of the year, according to the median forecast of analysts in a biweekly survey by Citigroup Inc.’s local Banamex unit.
Mexico’s Finance Ministry today sold 8.5 billion pesos of bonds maturing in 2024 as part of its weekly debt sale. The government also sold 7 billion pesos in 28-day notes, 10.5 billion pesos of those due in 91 days and 11.5 billion pesos of securities maturing in 182 days, according to the central bank.
Mexico’s central bank said today that international reserves fell by $59 million in the week ended Jan. 17, dropping to $176.5 billion.