| | |  Business News | January 2009 
Mexico’s Peso Falls After U.S. Consumer Confidence Plunges
 Valerie Rota - Bloomberg
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Mexico’s peso fell for a second day after U.S. Consumer confidence unexpectedly slid to a record low, signaling demand for Mexican exports from its biggest trading partner may erode further.
Mexico’s currency reversed earlier gains. It has lost nearly a third of its value over the past six months and dropped to a record low this month. In an effort to stem the currency’s decline, the central bank bought $322 million worth of pesos at an auction today.
“The peso’s weakness will continue,” said Jaime Ascencio, a fixed-income strategist in Mexico City at Actinver SA, the country’s biggest independent money manager. “There is a lot of risk aversion and negative economic data coming out of the U.S.”
The peso declined 0.4 percent to 14.1277 per dollar at 12:49 p.m. New York time, from 14.073 yesterday. It earlier weakened to as low as 14.223 per dollar, within 0.7 percent of a record low.
Banco de Mexico today bought pesos at an average weighted price of 14.2167 pesos per dollar. It has purchased $16.2 billion worth of its own currency since October to stem a rout.
The U.S. Conference Board’s index of consumer confidence fell to 37.7 in January from a revised 38.6 in December, the New York-based private research group said. Economists forecast confidence would rise to 39, according to the median projection in a Bloomberg survey. The U.S. Buys about 80 percent of Mexican goods sold abroad.
Mexico’s central bank Governor Guillermo Ortiz said today the economy will contract this year for the first time since 2001, slumping by as much as 1.8 percent. Employers will shed about 340,000 jobs, he said at the presentation of a quarterly report. Money that workers abroad sent to Mexico last year fell 3.6 percent in 2008, Ortiz said.
Slowing Inflation
Inflation will slow to below 4 percent by the end of he year and decelerate to 3 percent by 2010, Ortiz said. Mexico’s annual inflation surged to a more than seven-year high of 6.5 percent in December.
Yields on Mexico’s 10 percent bond due December 2024 rose three basis points, or 0.03 percentage point, to 7.67 percent. The bond’s price fell 0.3 centavo to 120.99 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1(at)bloomberg.net |
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