Mexico Peso Falls as Fed Minutes Add to Emerging-Market ConcernBen Bain
Mexico’s peso dropped after U.S. policy makers signaled they will probably keep tapering monetary stimulus, adding to the currency’s losses triggered by turmoil in other emerging-market nations.
The peso depreciated 0.7 percent to 13.3325 per dollar at 4 p.m. in Mexico City, its biggest loss since Feb. 3, according to data compiled by Bloomberg. Yields on benchmark peso bonds maturing in 2024 climbed nine basis points, or 0.09 percentage point, to 6.45 percent.
The peso fell as minutes of last month’s Fed meeting showed several Fed policy makers said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace” of bond purchases.
“It’s a significant factor” for the peso, Juan Carlos Alderete, a strategist at Grupo Financiero Banorte SAB in Mexico City, said by phone. “The minutes suggest that even with recent growth data coming in below expectations, it would be difficult to see a pause in the tapering.”
The U.S. central bank said Jan. 29 that it would trim its monthly purchases by $10 billion to $65 billion, sticking to a plan for gradual withdrawal of stimulus that economists surveyed by Bloomberg expect to end no later than December.
The peso also sank as Ukrainian President Viktor Yanukovych moved to quell a growing insurgency by granting sweeping powers to the army and police after a region declared independence from his government. Anti-government protesters and police, meanwhile, clashed in Thailand.
The International Monetary Fund said in a note prepared for Group of 20 central bankers and finance ministers that risks of turmoil in developing nations threaten the global economic recovery.