Mexico’s peso dropped, extending its biggest monthly decline in a year, as a surge in U.S. Treasury yields sapped demand for the Latin American nation’s assets.
The peso depreciated 0.8 percent to 12.8909 per dollar at 9:21 a.m. in Mexico City, extending the drop this month to 5.8 percent, the biggest since May 2012. The currency had advanced to 11.9771 on May 8, its strongest level since August 2011.
The currency was the biggest loser this month among the 16 major dollar counterparts tracked by Bloomberg after the Brazilian real and the South African rand on speculation the Federal Reserve will curtail a program of asset purchases that kept U.S. yields low.
The peso had rallied early in the month as investors in developed markets avoided near-zero interest rates at home and bet that Mexico would pass legal changes to speed economic growth.
“The move has been significant for Mexico,” Luis Estrada, the head of currency and derivatives trading at Banco Ve Por Mas SA in Mexico City, said in a telephone interview.
“We’ve broken some very important technical levels in this market and there’s been no consolidation.”
The 14-day relative strength index of the dollar valued in pesos rose to 75.8, the highest level since September 2011. A level above 70 implies an imminent reversal.
Yields on benchmark peso-denominated debt maturing in December 2024 climbed for an 11th day, increasing two basis points, or 0.02 percentage point, to 5.43 percent, the highest level on a closing basis since Jan. 14.
The yields have surged 91 basis points this month, the most since June 2008. Mexico’s gross domestic product rose 0.8 percent in the first quarter from a year earlier, the slowest pace since 2009, the government reported May 17.
U.S. Treasury 10-year note yields have risen 49 basis points this month as Fed Chairman Ben S. Bernanke said May 22 that the central bank may cut the pace of debt purchases if officials are confident the U.S. recovery will be sustained.
bloomberg.com
The peso depreciated 0.8 percent to 12.8909 per dollar at 9:21 a.m. in Mexico City, extending the drop this month to 5.8 percent, the biggest since May 2012. The currency had advanced to 11.9771 on May 8, its strongest level since August 2011.
The currency was the biggest loser this month among the 16 major dollar counterparts tracked by Bloomberg after the Brazilian real and the South African rand on speculation the Federal Reserve will curtail a program of asset purchases that kept U.S. yields low.
The peso had rallied early in the month as investors in developed markets avoided near-zero interest rates at home and bet that Mexico would pass legal changes to speed economic growth.
“The move has been significant for Mexico,” Luis Estrada, the head of currency and derivatives trading at Banco Ve Por Mas SA in Mexico City, said in a telephone interview.
“We’ve broken some very important technical levels in this market and there’s been no consolidation.”
The 14-day relative strength index of the dollar valued in pesos rose to 75.8, the highest level since September 2011. A level above 70 implies an imminent reversal.
Yields on benchmark peso-denominated debt maturing in December 2024 climbed for an 11th day, increasing two basis points, or 0.02 percentage point, to 5.43 percent, the highest level on a closing basis since Jan. 14.
The yields have surged 91 basis points this month, the most since June 2008. Mexico’s gross domestic product rose 0.8 percent in the first quarter from a year earlier, the slowest pace since 2009, the government reported May 17.
U.S. Treasury 10-year note yields have risen 49 basis points this month as Fed Chairman Ben S. Bernanke said May 22 that the central bank may cut the pace of debt purchases if officials are confident the U.S. recovery will be sustained.
bloomberg.com
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