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 Business News | December 2007 
UPDATE: Mexican Peso Declines After Fed Lowers Rate by Quarter Point
 Valerie Rota - Bloomberg
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 |  | All eyes are on the Fed.
- Miguel Gaytan |  | |
Mexico's peso fell, halting six straight days of gains, after the Federal Reserve cut the benchmark U.S. lending rate by a quarter-point, less than some traders expected.
The peso fell the most in two weeks on concern the Fed's reduction in its benchmark lending rate will fail to prevent a recession in the U.S., trimming demand for Mexican exports. Mexico sends about 80 percent of its exports to the U.S.
"More aggressive cuts would help prevent the U.S. economy from slowing," said Eduardo Perez, who helps oversee about $5 billion in assets at Mexico City-based insurance company Grupo Nacional Provincial SA. "This is what's worrisome."
The peso dropped 0.3 percent to 10.8452 per dollar at 3:03 p.m. New York time. Bonds also fell. The price on the benchmark 10 percent securities due in 2024 fell 0.31 centavo to 117.84 centavos per peso, according to Banco Santander SA. The yield rose 3 basis points, or 0.03 percentage point, to 8.07 percent.
Fed policy makers cut the benchmark lending rate to 4.25 percent from 4.5 percent. Before the announcement, futures on the Chicago Board of Trade showed traders saw a 64 percent chance that the Fed would cut the rate by a quarter point and a 36 percent chance it would lower the rate a half point.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1(at)bloomberg.net.
Mexico Peso Heads for Longest Appreciation Streak in 15 Months
Valerie Rota - Bloomberg
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Mexico's peso gained for a seventh day, its longest streak of gains since August 2006, as investors anticipated lower U.S. benchmark lending rates today that will boost Mexican securities' attractiveness.
A quarter-point reduction in the Federal Reserve's lending rate would widen the spread, or yield differential, with Mexico's benchmark to 3.25 percentage points. It would be the widest spread since February 2006.
'All eyes are on the Fed,' said Miguel Gaytan, a fixed- income strategist at Mexico City-based Bursametrica SA.
The peso rose 0.06 percent to 10.8022 per dollar at 10:34 a.m. New York time, extending its advance this month to 1.1 percent. The peso today touched 10.7956 per dollar, its strongest since Nov. 9.
Interest-rate futures contracts on the Chicago Board of Trade show a 100 percent probability of a reduction today of at least a quarter-percentage point in the Fed's 4.5 percent benchmark rate. Odds of a half-point reduction are 38 percent.
The Fed has cut the benchmark rate by 75 basis points this year while Mexican policy makers have boosted borrowing costs by 50 basis points to 7.5 percent, widening the spread between the two countries' rates by 1.25 percentage point.
Yields on the 10 percent bond due December 2024 were little changed at 8.04 percent. The price was 118.15 centavos per peso, according to Banco Santander SA.
The Fed is scheduled to announce its decision at 2:15 p.m. in Washington.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1(at)bloomberg.net. |
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