Mexico peso drops sharply in trade

On Tuesday after weak reports of factory output and consumer confidence in the US, Mexico’s peso dropped sharply. The peso was down 1.55 percent to 13.835 per dollar at the central bank's final reference.

Traders and analysts said that this move was exaggerated partly due to low-volume trading ahead of the New Year’s holiday. The currency jumped back to its levels around 13.735 per dollar in the trading late afternoon.

In a report, business activity in the US Midwest still continued to plunge in December though not at a very severe rate as was expected while the input prices still fell sharply.
 
Mexico gives around 80 percent of its exports to the United States and those goods are mainly parts for the US manufacturers. And adding to these dark times, the Conference Board that the US consumer confidence was also in its record low in December.

"The data was enough for some investors to pull out of positions and with today's volume even a little demand for dollars is reflected in movements like we saw," said Manuel Galvan, an analyst at MetAnalisis consultancy in Mexico City.” I expect the currency to bounce back next week once normal volume returns," he said.

MEXICO CURRENCY STRUGGLING

The peso of Mexico has been beaten since October along with the rising concerns that the US recession will surely hamper demand for the country’s exports and pull down growth in México. The benchmark IPC stock index edged up 0.12 percent to 22,420.01 points, sustained by top retailer Wal-Mart de Mexico.

Walmex shares increased 0.91 percent to 37.54 pesos. Walmex's value as a defensive play during a recession has been emphasized in recent analyst reports as the chain is expected to leverage its pull with suppliers to offer deeper discounts over its competitors.

Offsetting gains, shares in miner Penoles lost 5.29 percent to 160.37 pesos. In debts trading, the yield on the government's benchmark 10-year peso bond was flat at 7.98 percent.