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Mexico Peso Weakens Past 14 Per Dollar for First Time Since 2012

Mexico Peso Weakens Past 14 Per Dollar for First Time Since 2012

Posted by Shanelle Weir on December 02, 2014

Mexico’s peso weakened past 14 per dollar for the first time in two years on speculation that falling oil prices will curb foreign investment as the country opens its energy industry to private drilling.

The peso dropped 0.1 percent to 14.0089 per dollar at 6:40 a.m. in Mexico City. Since June 2012, the currency has mostly traded in a range between 12 and 14.

While Mexico passed laws ending the national oil company’s monopoly on drilling, the plunge in crude prices below $70 a barrel may lead some foreigners to defer projects, according to Juan Carlos Alderete, a currency strategist at Grupo Financiero Banorte SAB in Mexico City.

“That these investments could be delayed, at the least, is important when considering the country’s balance of payments,” Alderete said.

Futures on crude oil dropped as much as 1.6 percent in London. OPEC, responsible for about 40 percent of the world’s supply, resisted calls from members including Venezuela and Iran to reduce its quota of 30 million barrels a day at a Nov. 27 meeting in Vienna.

The peso is at a technical level that may trigger options payouts or prompt some traders to exit losing trades, Mike Moran of Standard Chartered Plc said by phone from New York.

“Fourteen is not only a psychological level,” Moran said. The peso’s trajectory “will be predicated on really how oil prices continue to trade, at least in the very short term.”

The U.S. Federal Reserve will move sooner rather than later to raise interest rates, which should reduce the appeal of emerging-market currencies among fixed-income investors, said Eduardo Suarez, a strategist at Bank of Nova Scotia.

“On the one side, you see the dollar being boosted by monetary policy,” Suarez said by telephone from Toronto. “On the other, there is the price of oil.”

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