Mexican Peso Plunges, Stocks Tumble as Dollar Rallies

Mexico’s Peso took a deep turn Tuesday as the US Dollar bullied its way up against the market’s major currencies after the German economy slipped further fueling expectations that Europe will eventually cut its interest rates.  Stocks meanwhile sank deeper.

Mexican Peso Succumbs to Dollar Pressures

The Peso took a dive to 10.1725 against the Dollar, down by 0.37 percent at the close of the market.  The IPC stock index benchmark on the other hand moved 1.49 percent downwards owing to the losses of America Movil, a cell phone operator based in Mexico.  Current index was pegged at 26,023.  The tumble was precipitated by the cut made by Stanley Morgan on its price target for its New York traded stocks.

The US Dollar continued its furious rally of the recent month, posting significant gains against other major currencies at the financial market.  The Dollar touched a record high increase this 2008, influencing the downward direction of major currencies at the close.  The Dollar’s performance was boosted by the emerging view that economic weakness is now a global conflagration negating opinions in the past that the crisis is only limited to the United States.

Mexican Economy Starting to Cool Down

Ricardo Aguilar, a brokerage Invex analyst based in Mexico City said that the Mexican economy will most likely suffer from slow growth rates in the coming months.  Aguilar added however that the slow down will be less severe compared to the market situation and general economic slide being felt in United States.

The second quarter report released last week showed the Mexican economy slowing down due to weak demands of the US for its manufacturing export sector.  The United States accounts for 80% of Mexico’s export market and a general slow down of the US economy will likely hit the South American powerhouse.  Mexico’s growth rate this period chilled to 2.8 percent compared to 3.2 percent posted on the same period in 2007.

Debt and Stocks Trading are Biggest Casualties

Debt trading also fell by 0.123 point in price for the government’s 10-year peso bond benchmark.  Current bid was registered at 94.750 moving the yield upwards to 2 basis points at 8.57 percent.

Stocks trading took the biggest hit as shares held by America Movil lost a significant 1.43 percent, pegging a closing price at 25.50 pesos.  The company’s New York traded stocks on the other hand bled by 1.84 percent, registering a closing price of $50.08.

Tuesday saw Morgan Stanley make a big cut from its original price target for Mexico’s America Movil shares.  At the New York trading floors, Morgan Stanley dropped its price from $84 to a meager $68.  This contributed significantly to the slow down of the Mexican market.