Mexico Peso Falls Most in More Than Four Weeks on Dubai Concern

By Carlos Manuel Rodriguez

Nov. 26 (Bloomberg) -- Mexico’s peso fell the most in four weeks as Dubai’s attempt to reschedule debt payment shook investor confidence in emerging markets.

The peso weakened 1.4 percent to 13.0142 per U.S. dollar at 5:02 p.m. New York time, from 12.8315 yesterday. Demand for pesos also fell as crude oil, Mexico’s biggest export, fell 2.2 percent to $76.23 a barrel.

“Dubai caused some nervousness that affected the stock and currency markets,” said Alonso Madero, who helps manage 60 billion pesos in assets at Actinver SA in Mexico City. “The Dubai concerns should dispel in the coming days.”

Dubai World, the government investment company burdened by $59 billion of liabilities, roiled markets around the world by seeking to delay repayment on much of its debt.

Moody’s Investors Service and Standard & Poor’s cut the ratings on Dubai state companies yesterday, saying they may consider state-controlled Dubai World’s plan to delay debt payments a default.

Yields on benchmark government peso-denominated bonds due in 2024 rose six basis points, or 0.06 percentage point, to 8.14 percent. The bond’s price fell 0.51 centavo to 116.10 centavos per peso, according to Banco Santander SA.

Yields have fallen eight basis points this week as Fitch Ratings’s decision to shift Mexico’s outlook to stable after cutting the rating one level to BBB on Nov. 23 damped investor concern more downgrades would follow. S&P, which has a negative outlook on Mexico’s BBB+ rating, the third-lowest investment- grade rating, hasn’t decided whether to cut it as falling oil output swells the country’s budget gap.

‘Killing the Market’

S&P will likely decide against cutting Mexico’s rating, helping the peso rally to 12.50 per dollar in coming months, Madero said in a phone interview.

“Remittances keep coming, the international reserves levels are good, the fiscal reform should help,” Madero said. “The uncertainty about a rating cut was killing the market, and now it is gone.”

The peso will trade at 13 per dollar by year-end, according to the median forecast of 20 economists surveyed by Bloomberg News. The currency has appreciated 5.3 percent this year, the fourth-worst performance among the 16 most-traded currencies tracked by Bloomberg, ahead of Singapore’s dollar, Japan’s yen and Taiwan’s dollar.