Mexican Peso Drops Due to Damped Export Outlook Caused By US Fiscal Cliff

The major currency of Mexico, Peso has experienced a fall for 3 consecutive days now. The investors are concerned as US politicians still have not been able to make any sort of progress as far as the budget talks are concerned. This has definitely damped the economic outlook for US and so as Mexico. Mexico’s biggest trading partner is US and a crisis over US economy is going to impact Mexico big time. According to the latest released reports, more than 80% of Mexico’s total export volume is done in US.

Peso has slumped by 0.2% and is currently priced at 13.0616 per USD. It actually touched 13.0810 today marking the weakest intraday level for the currency since 20th November. That being said, Peso is still the best performing currency if the 16 most traded currency partners of USD are considered. Peso actually advanced by 6.7% against USD in 2012.

US President Barack Obama was scheduled to meet the business leaders today. The lawmakers of the biggest economy of the world and President Obama are trying to agree on a compromise deal that can avoid the spending cut and tax increase bill scheduled to be effective from the 1st day of 2013. The bill, if comes into action, may help the country raise around $607 billion. However, it is feared by many that the tax increases will not go down well with the major enterprises (According to the bill, the high earners are supposed to pay more taxes in comparison with those who earn less) and that on a whole, may dampen the economic prospects of US. Many are anxious that this so called fiscal cliff can actually head US back to another recession, thereby impacting the global economy as well.

The Majority Leader of Senate, Harry Reid stated that overall it has been disappointing on how the budget talks are going on currently to avoid the fiscal cliff. Mario Copca who works as a currency strategist for Metanalisis SA stated that the investors were hoping for some positive news for Mexico today and as that didn’t happen, Peso was affected. Peso bond yields due in 2022 experienced a fall of 3 basis points and are currently at 5.50%. The price is currently at 107.44 centavos per peso, increasing by 0.25 centavo.

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