Mexico Peso Gains on Steady Rate Bets After Report on GDP

Mexico’s peso rose to a five-month high as slower-than-forecast first-quarter economic growth fueled speculation policy makers will delay raising borrowing costs, boosting demand for the nation’s debt.

The currency increased 0.2 percent to 12.8562 per dollar at 5:20 p.m. in Mexico City, the strongest level on a closing basis since Dec. 9. The peso appreciated 0.4 percent this week.

Gross domestic product expanded 1.8 percent in the first quarter from the year earlier, compared with a median estimate for 2.1 percent growth, the national statistics institute reported today. Analysts surveyed by Citigroup Inc.’s local unit this week pushed back forecasts for when policy makers in Latin America’s second-biggest economy will increase borrowing costs to April 2015 from March 2015.

“The GDP report suggests the possibility of an accommodative stance for a longer time than was expected,” Juan Carlos Alderete, a currency strategist at Grupo Financiero Banorte SAB in Mexico City, said in an e-mailed response to questions. “A hiking cycle in Mexico could be delayed more than was thought before this week’s information.”

The central bank lowered its 2014 growth forecast on May 21 after consumer confidence plunged to its lowest level in almost four years in January, when new taxes took effect. The economy will grow 2.3 percent to 3.3 percent this year, Banco de Mexico said, down from a previous forecast of 3 percent to 4 percent.

Roberto Galvan, a trader at Intercam Casa de Bolsa SA, said in an e-mailed response to questions that the “very bad” GDP number is helping keep money from leaving the Mexican market.

Yields on Mexican peso bonds maturing in 2024 rose one basis point, or 0.01 percentage point, to 5.9 percent, as the price fell 0.07 centavo to 132.171 centavos per peso, according to data compiled by Bloomberg.

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