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Mexico’s Peso Has Best Quarter in 14 Years on High-Yield Demand

Mexico’s Peso Has Best Quarter in 14 Years on High-Yield Demand

By Valerie Rota

June 30 (Bloomberg) -- Mexico’s peso posted its biggest quarterly gain in 14 years as mounting speculation the global recession is easing fueled demand for emerging-market assets.

The currency was little changed at 13.1807 per U.S. dollar at 5 p.m. New York time, from 13.1851 yesterday. It rose 7.5 percent in the second quarter, the most since 1995. The peso rebounded from a rout over the past nine months that pushed the Mexican currency to a record low in March.

“The budding signs that perhaps the worst of the recession has passed has tempted investors out of relatively safe assets like the dollar and into riskier and higher-yielding assets like the Mexican peso,” said Omer Esiner, a senior currency analyst at Travelex Global Business Payments in Washington.

The gains in the peso during the April-to-June period was part of a rally in global stocks and other emerging-market currencies. The Standard & Poor’s 500 Index posted its best quarter since 1998 while Brazil’s real had its biggest quarterly gain since the introduction of the currency in 1994.

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Still, the gains in Mexico’s peso may be short-lived “given the long list of headwinds facing the global economy,” Esiner said. “In the near-term, we might be looking at a pullback in the peso against the dollar, as well as a pullback in equities, commodities and emerging-market assets in general.”

The U.S. Conference Board’s consumer sentiment index decreased to 49.3 this month from a revised 54.8 in May, the New York-based research group said today. The U.K. economy shrank 2.4 percent in the first quarter from the final three months of 2008, more than previously estimated and the biggest contraction since 1958, the Office for National Statistics said today.

Yields on Mexico’s 10 percent bond due December 2024 rose one basis point, or 0.01 percentage point, to 8.46 percent. The bond’s price fell 0.11 centavo to 113.2 centavos per peso, according to Banco Santander SA.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.

Published Wednesday, July 1, 2009 9:34 AM by Zinnia Q.

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