(Bloomberg) -- Mexico’s peso led losses among global major currencies, joining a rout in emerging markets, after the nation cut its economic forecast amid a slump in oil output.
The peso fell 1.1 percent at 16.8032 per dollar, the lowest close on record. It also posted the biggest decline among 16 world major currencies tracked by Bloomberg. A custom index with 20 developing-nation tenders extended its plunge over the past year to 20 percent.
Mexico’s currency has followed a slide in developing nations amid the threat of a further global economic slowdown and as rising short-term bond yields in the U.S. attract international investors. President Enrique Pena Nieto’s administration is also struggling with the collapse in oil prices and crude production.
“It’s a triple whammy,” Juan Carlos Alderete, a strategist at Grupo Financiero Banorte SAB said in an e-mail. “All the concern over growth in developing nations, the plunge in oil and speculation on when the Federal Reserve will raise rates make create such a difficult backdrop for the peso.”
The cut in Mexico’s growth forecast came just a week after a similar move by the central bank. Gross domestic product will expand 2 percent to 2.8 percent this year, down from a May forecast of 2.2 percent to 3.2 percent, Deputy Finance Minister Fernando Aportela said Thursday.
Oil output has continued to slide this year amid budget cuts and a series of accidents at Petroleos Mexicanos, defying a government forecast for the state-owned oil company to reverse a 10-year plunge in output. Manufacturing exports excluding autos fell 1.9 percent in the second quarter as industrial production stalled in the U.S., which buys 80 percent of Mexico’s exports.
Mexican policy makers have left the overnight borrowing rate unchanged at a record-low 3 percent since mid-2014 to boost an economy that grew less than analysts expected in eight of the past 13 quarters. More recently, the central bank has signaled that higher borrowing costs in the U.S. will probably call for an increase in Mexico, even as the inflation rate falls to the lowest in more than four decades.
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