Mexico’s Peso Declines to Lowest Since September on Fed Outlook

Mexico’s peso fell to a four-month low as mounting concern that the Federal Reserve will reduce U.S. monetary stimulus at a faster pace outweighed a stronger growth outlook for Latin America’s second-biggest economy.

The peso depreciated 0.3 percent to 13.3108 per U.S. dollar at 4 p.m. in Mexico City, the lowest closing level since Sept. 5. Yields on peso bonds due in 2024 rose four basis points, or 0.04 percentage point, to 6.51 percent, according to data compiled by Bloomberg. The price fell 0.32 centavo to 127.18 centavos per peso.

Mexico’s currency has slumped 2.1 percent in January on concern that the value of the country’s assets will erode as the Federal Reserve reduces monetary stimulus that has helped bolster demand for risker, emerging-market assets. The Fed will cut its $75 billion in monthly purchases in $10 billion increments over the next six meetings before ending the program no later than December, according to the median forecasts of economists surveyed by Bloomberg this month.

“It’s being dominated now by the effect of the uncertainty of how Fed policy is going to be determined,” Rafael Camarena, an economist at Grupo Financiero Santander Mexico SAB, said in a telephone interview from Mexico City.

The peso has declined 0.6 percent in the past two days even as a survey that Citigroup Inc.’s Banamex unit published yesterday showed analysts expect Mexico’s gross domestic product to grow 3.43 percent this year, up from the prior median projection of 3.40 percent. The government estimates the economy grew 1.3 percent last year. The currency will strengthen to 12.6 per dollar by year-end, according to the median forecast of analysts in Banamex’s biweekly survey.

Mexico’s peso has been more stable than its peers, Axel Christensen, BlackRock Inc.’s head of Latin America and Iberia strategy, said today at an event in Mexico City.

Three-month historical volatility, a measure of the magnitude of the peso’s fluctuations during the period, was 10.1 percent, the lowest level on a closing basis since June, according to data compiled by Bloomberg.

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