Mexico Peso Rallies as Drop in U.S. GDP Buoys Stimulus Outlook

Mexico’s peso rose to a seven-month high as a contraction in the U.S. economy fueled speculation that central banks will maintain monetary stimulus supporting demand for the Latin American country’s assets.

The currency advanced 0.3 percent to 12.8410 per U.S. dollar at 6:36 p.m. in Mexico City, the strongest level since Oct. 17, according to data compiled by Bloomberg. Benchmark government bonds due in 2024 rose 0.15 centavo to 132.97 centavos per peso, pushing yields down two basis points, or 0.02 percentage point, to 5.81 percent.

The peso climbed today along with most emerging-market currencies after the U.S. reported gross domestic product fell at a 1 percent annualized rate, worse than the most pessimistic forecast among economists surveyed by Bloomberg. Bonds have rallied as interest rates at virtually zero in developed countries spurred demand for higher-yielding Mexican assets.

“There’s real money entering into the bonds,” Ramon Cordova, a trader at Banco Base SA, said in an e-mailed response to questions. “The GDP data reduces expectations for an increase in rates, and high-yield Mexican bonds benefit from that. If dollars come into buy bonds in pesos, sell dollars and buy pesos, the peso appreciates.”

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