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 Business News | July 2006 
Mexican Peso Advances to Two-Month High; Local Bonds Gain
 Bloomberg
Mexico's currency rose to a two- month high on expectations Felipe Calderon will be confirmed the winner of presidential elections and form alliances needed to pass legislation that will spur faster economic growth.
The peso has gained 3.4 percent since the July 2 elections, the biggest rally among the 71 world currencies Bloomberg tracks against the dollar, as investors bet Calderon will be able to obtain a two-thirds congressional majority needed to fulfill promises such as opening the oil industry to private investment, said Mario Correa, an economist at Bank of Nova Scotia's unit in Mexico City.
"Calderon has made it clear that he needs congressional support and we think he might even give up cabinet positions to other parties in exchange," Correa said in a telephone interview. "This opens the door for needed reforms, helping boost Mexico's markets."
The peso rose 0.1 percent to 10.965 pesos per dollar, its highest since May 11, at 11:42 a.m. New York time.
A former energy minister, Calderon has pledged to maintain President Vicente Fox's policies that helped curb inflation and drive down interest rates.
The yield on Mexico's 8 percent peso bond due December 2015 fell 2 basis points, or 0.02 percentage point, to 8.7 percent, according to Santander Central Hispano SA. The price, which moves inversely to the yield, rose 0.12 centavo, to 95.51 centavo.
Calderon beat opposition contender Andres Manuel Lopez Obrador by 0.6 percentage point, according to the electoral institute. Lopez Obrador has claimed fraud in vote tallies and is challenging the results in court. The electoral tribunal has until Aug. 31 to rule on the challenge.
`Civil Resistance'
"While Lopez Obrador is being confrontational, there could be some short-term negative volatility in the peso," Correa said.
Lopez Obrador attracted hundreds of thousands of supporters to a protest march in the capital on July 16 and called for a week of "peaceful, civil resistance" without elaborating.
Still, Correa expects the tribunal to declare Calderon the winner in coming weeks and he expects Lopez Obrador's Party of the Democratic Revolution to accept the ruling, helping drive the peso to as strong as 10.8 to the dollar by next month.
Valerie Rota vrota1@bloomberg.net |
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