MEXICO CITY, Oct 20 (Reuters) – Worries more Mexican companies may be exposed to heavy currency derivatives losses hit the peso on Monday, while bond yields shot to their highest in more than two years.
The peso <MXN=> MEX01 fell 1.32 percent at the central bank’s final 1:30 p.m. local time (1830 GMT) reference to 12.95 per dollar.
The yield on the government’s benchmark 10-year peso bond <MX10YT=RR> jumped 30 basis points to 9.52 percent, its highest since June 2006 amid worries a U.S. slowdown would hit Mexico.
The benchmark IPC stock index .MXX closed 2.33 percent higher at 20,786.21 points as global equity markets rallied on signs the credit logjam might be easing as the cost of borrowing between banks fell on Monday.
Traders said the peso fell after a small number of market players demanded a large amount of dollars, stoking concerns that banks were buying up greenbacks to cover further losses in derivatives markets by Mexican corporations.
“For as long as we continue to have these doubts about the actual exposure of Mexican corporations to complicated derivatives, you will have this kind of behavior,” said Alberto Bernal-Leon, head of emerging markets strategy at Bulltick Capital Markets in Miami.
Local officials have blamed demand for dollars to cover losses in derivatives markets from Mexican companies like supermarket operator Comercial Mexicana (COMEUBC.MX: Quote, Profile, Research, Stock Buzz) and others for exacerbating the peso’s steep losses in recent weeks.
Worries about the global credit crisis and a recession in the United States have knocked nearly 24 percent off the peso’s value since early August, while stocks are down around 35 percent from an April high.
A gloomy outlook from Federal Reserve Chairman Ben Bernanke on the U.S. economy added to worries that Mexico could be dragged into a deep slowdown by a recession in the economy of its top trading partner, pounding Mexican bonds.
“It is just not a good scenario for Mexico and that is why it is being attacked,” Bernal-Leon said.
In the equities market, shares of America Movil (AMXL.MX: Quote, Profile, Research, Stock Buzz), Latin America’s biggest cell phone operator, rose 3.70 percent to 22.98 pesos while its stock in New York (AMX.N: Quote, Profile, Research, Stock Buzz) gained 3.94 percent to $35.13.
Shares of Cemex (CMXCPO.MX: Quote, Profile, Research, Stock Buzz) the world’s No. 3 cement company,
climbed 6.85 percent to 10.14 pesos while its shares on Wall Street (CX.N: Quote, Profile, Research, Stock Buzz) added 5.76 percent to $7.90.
Cemex shares plummeted nearly 50 percent in the last three weeks as panicked investor sold off emerging
market assets and the company reported that it will cut costs and jobs as it struggles with the severe housing crisis in the United States.
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