Mexican Peso Falls to Record 16 per Dollar as Commodities SwoonIsabella Cota
Mexico’s peso dropped to 16 per dollar for the first time since its 1993 revaluation as a rout in commodities followed an auction of oil blocks that many analysts declared a failure.
A decline in crude prices discouraged demand when Mexico took its first step toward dismantling the state oil monopoly, with only two blocks attracting sufficient bids last week to warrant contracts. Adding to the disappointment are an economy that has failed to meet expectations and the escape from prison of the drug trafficker Joaquin “El Chapo” Guzman.
“We are in uncharted territory,” Win Thin, the New York-based global head of developing-nation strategy at Brown Brothers Harriman & Co., said in an e-mailed response to questions. “Further dollar gains are likely.”
The local currency fell for a fourth straight day, slipping 0.4 percent to 15.9839 per U.S. dollar at 10:44 a.m. in Mexico City. It earlier dropped to 16.0041, the weakest level since the 1993 creation of what was called the nuevo peso. In May, the central bank said it would keep selling $52 million daily at least through Sept. 29, extending support for the currency that started in March.
Policy makers kept the target lending rate on June 4 at a record low 3 percent for an eighth straight meeting after reducing their growth forecast. Public spending reductions, a drop in oil output at state-owned Petroleos Mexicanos and contraction in the U.S. are weakening Latin America’s second-largest economy.
“We don’t see positive local catalysts to help strongly revert the weakening trend,” Juan Carlos Alderete, a strategist at Grupo Financiero Banorte SAB, said by e-mail. “Growth expectations continue to be revised lower, and the peso has lost at least some of its relative defensiveness as investors are increasingly cautious on oil prospects.”
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