Dragunov
10-15-2008, 02:41 PM
Mexico's Peso Falls as Auctions Fail to Ease Recession Concern
By Michael J. Moore
Oct. 15 (Bloomberg) -- Mexico's peso declined for a second day after the central bank's purchase of $400 million of the currency failed to ease concern that the nation's largest trading partner is headed toward a recession.
The peso tumbled 3.1 percent to 12.7120 per dollar at 11:56 a.m. New York time, from 12.3134 yesterday. The currency rose 6.9 percent Oct. 13, the biggest increase in 13 years, after a 14 percent decline last week.
U.S. retail sales fell 1.2 percent in September, more than forecast, following a 0.4 percent decline the prior month, the Commerce Department said today in Washington. The U.S. purchases about 80 percent of Mexican exports.
``The release of very weak retail sales in the U.S. has a fairly profound impact on Mexico,'' said Lawrence Goodman, head of global emerging-market currency strategy at Bank of America Corp. in New York. High volatility in the peso ``makes it difficult to envision a substantial inflow that would be requisite to push the peso higher.''
Investor demand for dollars overwhelmed the auction, as Banco de Mexico received $1.83 billion in bids, according to data on the central bank's Web site.
Banco de Mexico sold $8.9 billion of foreign reserves last week, including $6.4 billion on Oct. 10, after the peso slid to a record low of 14.2927. The sales pushed down the country's foreign reserves to a one-year low of $75 billion, the central bank said yesterday.
Dollar Sales
Policy makers began selling dollars on Oct. 8 after the peso fell as much as 13.8 percent, the biggest intraday decline since the government abandoned a currency peg in December 1994.
The peso's decline has also been fueled by the tumble in oil prices. Crude oil dropped as low as 4.7 percent to $74.92 per barrel in New York Mercantile Exchange trading, its lowest level in 13 months. It's down 48 percent from a record high of $147.27 reached on July 11. Oil accounts for about 40 percent of the Mexican government's revenue.
The yield on Mexico's benchmark 10 percent peso bonds due in 2024 rose 15 basis points, or 0.15 percentage point, to 9.06 percent. The bond's price fell 1.36 centavos to 107.92 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
Last Updated: October 15, 2008 11:58 EDT
http://www.bloomberg.com/apps/news?pid=20601083&sid=aidD_gnZqie0
By Michael J. Moore
Oct. 15 (Bloomberg) -- Mexico's peso declined for a second day after the central bank's purchase of $400 million of the currency failed to ease concern that the nation's largest trading partner is headed toward a recession.
The peso tumbled 3.1 percent to 12.7120 per dollar at 11:56 a.m. New York time, from 12.3134 yesterday. The currency rose 6.9 percent Oct. 13, the biggest increase in 13 years, after a 14 percent decline last week.
U.S. retail sales fell 1.2 percent in September, more than forecast, following a 0.4 percent decline the prior month, the Commerce Department said today in Washington. The U.S. purchases about 80 percent of Mexican exports.
``The release of very weak retail sales in the U.S. has a fairly profound impact on Mexico,'' said Lawrence Goodman, head of global emerging-market currency strategy at Bank of America Corp. in New York. High volatility in the peso ``makes it difficult to envision a substantial inflow that would be requisite to push the peso higher.''
Investor demand for dollars overwhelmed the auction, as Banco de Mexico received $1.83 billion in bids, according to data on the central bank's Web site.
Banco de Mexico sold $8.9 billion of foreign reserves last week, including $6.4 billion on Oct. 10, after the peso slid to a record low of 14.2927. The sales pushed down the country's foreign reserves to a one-year low of $75 billion, the central bank said yesterday.
Dollar Sales
Policy makers began selling dollars on Oct. 8 after the peso fell as much as 13.8 percent, the biggest intraday decline since the government abandoned a currency peg in December 1994.
The peso's decline has also been fueled by the tumble in oil prices. Crude oil dropped as low as 4.7 percent to $74.92 per barrel in New York Mercantile Exchange trading, its lowest level in 13 months. It's down 48 percent from a record high of $147.27 reached on July 11. Oil accounts for about 40 percent of the Mexican government's revenue.
The yield on Mexico's benchmark 10 percent peso bonds due in 2024 rose 15 basis points, or 0.15 percentage point, to 9.06 percent. The bond's price fell 1.36 centavos to 107.92 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
Last Updated: October 15, 2008 11:58 EDT
http://www.bloomberg.com/apps/news?pid=20601083&sid=aidD_gnZqie0