Mexico Peso Drops as Ukraine Concern Saps Demand

Mexico’s peso fell to a one-week low as investors reduced demand for emerging-market assets amid concern that the crisis in Ukraine is escalating.

The currency slipped for the first time in three days, dropping 0.6 percent to 13.0981 per U.S. dollar at 4 p.m. in Mexico City, according to data compiled by Bloomberg. The peso fell to its weakest level on a closing basis since April 3. Mexico’s benchmark IPC Index lost 0.1 percent while the Standard & Poor’s 500 Index increased 0.7 percent.

The peso dropped along with most other emerging-market currencies after Ukraine unleashed an offensive to dislodge militants from towns in its eastern Donetsk region as Russia’s prime minister said the country risks civil war. Delays in passing rules to put in place constitutional amendments opening up the energy industry are also weighing on the peso, according to Eduardo Rodriguez, a trader at Casa de Bolsa Finamex SAB.

“The international environment isn’t good anymore because you have stock markets falling,” Rodriguez said in a phone interview from Guadalajara, Mexico. “In the domestic market, there’s also a certain disillusionment.”

Mexico’s political parties continue to wrangle over rules for opening up the energy industry, fueling concern that so-called secondary laws may be delayed. President Enrique Pena Nieto has yet to send Congress his plan for implementing the constitutional changes that the country passed last year.

Yields on peso bonds maturing in 2024 rose two basis points, or 0.02 percentage point, to 6.19 percent, according to data compiled by Bloomberg.

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