Mexican Peso Falls to 15-Month Low on Virus Impact Fears

(Bloomberg) -- The Mexican peso trimmed losses during the New York trading session Friday after falling to the lowest since December 2018 on fears the coronavirus will damp growth worldwide.

The peso dropped 1.7% to 20.1924 per dollar as of 11:37 a.m. ET versus a session low of 20.3803. It was the worst performing currency in emerging markets after the Colombian peso.

Mounting concern that coronavirus will impact U.S. and global growth sent stocks tumbled worldwide today as 10- and 30-year U.S. Treasury yields fell to record lows. Mexico’s peso eased its early losses as the Deputy Finance Minister Gabriel Yorio said the government is preparing a fiscal stimulus to reduce the impact of the virus.

“It’s the pre-eminent EM risk proxy, and markets are in meltdown mode,” said Ilya Gofshteyn, a Standard Chartered strategist based in New York. “The fear is spreading to second-round effects. There is a broad understanding that activity will take a hit.”

Investors are expecting a quicker pace of monetary policy easing from the Bank of Mexico. Consensus forecast from 20 analysts in a survey published by Citibanamex on Thursday showed a 50 basis-point cut this month. In the previous poll on Feb 20, only 25 points reduction was expected.

The number of coronavirus cases globally exceeded 100,000 after more infections were reported in Europe and Iran. Investors are waiting for signs that the virus will affect U.S. economic activity.

“The market is starting to price the virus spread -- and the drag on the economy -- in the U.S.,” said Danny Fang, a New York-based strategist in New York.

To contact the reporters on this story: Justin Villamil in Mexico City at jvillamil18@bloomberg.net;George Lei in New York at glei3@bloomberg.net

To contact the editors responsible for this story: Carolina Wilson at cwilson166@bloomberg.net, Philip Sanders

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