Mexican Peso Leads Emerging-Market Losses as Dollar Gains on Fed

  • Most-liquid developing currency slides as traders dump risk
  • Peso outstrips peers as crude oil slides to two-week low

The Mexican peso led losses among emerging market currencies on Tuesday as the dollar gained on speculation of U.S. interest-rate increases, pushing the most-liquid emerging-market currency lower.

The peso depreciated 1.1 percent to 18.8249 per dollar as of 2:25 p.m. in Mexico City as an index of emerging-market currencies fell 0.4 percent. The Mexican currency has lost 8.7 percent in 2016, the worst performance for emerging markets after the Argentine peso.

Mexico’s currency is the most traded in developing nations and is often used to hedge risk in other markets, which means that on days when global sentiment sours it’s often among the most battered assets. The U.S. dollar advanced for a fifth day, its longest winning streak since March, amid speculation that the Federal Reserve will raise rates this year. Oil fell 1.1 percent in New York to the lowest since Aug. 15.

“Emerging market currencies are seeing the effect of prevailing dollar strength,” said Miguel Benedetty, an associate at INTL FCStone Ltd, .in New York. “The peso was weighed by intraday selling and a reversal in the price of crude oil, which has weighed on most Latin American currencies.”

Mexico’s central bank will release its inflation report on Wednesday, which may provide traders with clues about the future path of interest rates. The central bank has increased borrowing costs twice this year as it seeks to prop up the currency.

“We always see the peso underperform in this environment because its the most liquid,” said Christian Lawrence, a strategist at Rabobank NA in New York.

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