Mexican peso weakens on U.S. And European growth concerns

Mexico’s peso fell as slower-than- forecast European growth and a drop in housing starts in the U.S. tempered confidence in the global economy and demand for riskier assets.

The peso declined 0.4 percent to 12.2776 per dollar at 1:39 p.m. New York time, from 12.2296 yesterday. The currency has gained 0.5 percent this year against the dollar.

Housing starts declined 1.5 percent to a 604,000 annual rate, in line with the median forecast of economists surveyed by Bloomberg News, from June’s 613,000 pace that was less than previously estimated, Commerce Department figures showed today in Washington. Germany’s economy, Europe’s largest, expanded 0.1 percent from the first quarter, while growth in the euro area was a less-than-forecast 0.2 percent, reports showed today, adding to concern nations will struggle to curb budget deficits. The peso earlier pared losses after the Federal Reserve said that industrial production in the U.S., Mexico’s largest trading partner, climbed in July by the most this year.

“The U.S. numbers are more influential given the proximity between both economies, but the fact that the German figures were horrid as well, that also lends credibility to this slower growth trajectory within the developed bloc,” Aryam Vazquez, an emerging markets economist at Wells Fargo & Co. in New York, said in a telephone interview. “The underlying strength in the peso is now under the threat of the global economic cycle and the fear of a more pronounced economic deceleration in the U.S.”

The yield on Mexico’s peso bonds due in 2024 fell seven basis points, or 0.07 percentage point, to 6.31 percent, according to Banco Santander SA. The price of the security rose 0.80 centavo to 133.17 centavos per peso.

Mexico sold all 5.5 billion pesos of the 28-day Cetes it offered at auction today, the central bank said in an e-mailed statement. The government sold 6.5 billion pesos of 91-day Cetes and 7 billion pesos of 175-day Cetes, the statement said.