Mexico’s currency hit its weakest level on record on Wednesday, part of a broader slump in regional currencies depressed by concern that Greece may leave the euro zone and that U.S. interest rates are headed higher.
Mexico is seen as particularly vulnerable to the effects of higher borrowing costs in the Unites States, its main trading partner. The country’s manufacturing sector slipped in June to its lowest in 11 months, a survey showed, even before the potential U.S. rate hike.
“The drop in the PMI (purchasing managers’ index) adds to the list of data from Mexico that have come in weaker than expected in recent weeks,” Neil Shearing, chief emerging markets economists with London-based Capital Economics, wrote in a note to clients.
The Mexican peso fell to as much as 15.8106 per dollar, its weakest level on record, after private payrolls data
showed the U.S. economy was gathering solid momentum after contracting at the start of the year.
The numbers boosted prospects that the U.S. Federal Reserve will raise interest rates more aggressively than expected, potentially reducing the allure of higher-yielding, riskier emerging market assets.
U.S. employment data, rather than concern over Greece, is the main reason for the peso’s weakness, Mexico’s Finance Minister Luis Videgaray said on Wednesday. Citing foreign reserves worth $192 billion, he added that
Mexico has enough resources to ensure the smooth functioning of its foreign exchange market.
Other Latin American currencies also posted losses, with the Brazilian real dropping 0.6 percent and the Colombian
peso 1.1 percent weaker.
Concern over potential contagion from Greece, if the country leaves the euro zone, left investors more averse to risk in general.
Many analysts say, however, that financial links between Greece and Latin America are very weak, which should prevent large market impacts here.
Mexico's currency hit its weakest level on record on Wednesday, part of a broader slump in regional currencies depressed by concern that Greece may . . .
