Peso Recovers, Political Rumors Denied

By: AP Email
By: AP Email

MEXICO CITY (AP) - Mexico's peso continued to recover Tuesday
from its steep drop last week, as experts denied the resurgence of
a leftist candidate in polls on the July 1 presidential race had
anything to do with the decline.

They said continuing concerns about Europe's sovereign debt
crisis and the U.S. economy are the driving forces behind the
currency's volatility.

"The elections aren't affecting the exchange rate in Mexico,"
said Ana Gonzalez, a currency exchange analyst for Grupo Financiero
Monex. "It's going to move much more because of events in Europe
and the United States."

The peso closed Tuesday at an interbank rate of around 14.23 per
$1, after falling as low as 14.60 in trading last week. The peso
closed at 14.39 on Friday and 14.24 on Monday. At the beginning on
May, it was trading around 13.00 to $1.

The governor of Mexico's central bank, Agustin Carstens, said
last week that investors' fears about a possible Greek debt default
or its exit from the eurozone, as well as concerns about debt in
Spain and Italy, were driving investors to seek safe havens,
hitting emerging markets such as Mexico.

However, some media analysts reported that investors' concerns
may have been fed by a poll released Thursday by the newspaper
Reforma which said that centrist candidate Enrique Pena Nieto had
29 percent support, with Lopez Obrador close at 26 percent.

The poll was conducted in late May and had a margin of error of
3 percentage points. A month earlier, Pena Nieto had led the
leftist 32 percent to 21 percent in the same poll.

Some business groups opposed Lopez Obrador during his failed
2006 presidential bid, claiming he would endanger private property
and economic stability, accusations Lopez Obrador denied. The
leftist has since sought to mend fences with the business
community, and some claim he has grown too close to them. Tape
recordings released last week suggest a supporter may have asked
businessmen to pony up $6 million in campaign donations for Lopez
Obrador, who claims the man was not acting on behalf of the

This week, other polls have since been released showing that,
while Lopez Obrador does appear to be gaining on Pena Nieto, he is
anywhere from nine to 14 points behind the front-runner.

On Tuesday, Rogelio Ramirez, an economist and adviser to Lopez
Obrador, issued a statement saying that some news media
"attributed the weakening (of the peso) to the polls, without any
further evidence."

"The peso has weakened because of the financial crisis in the
eurozone, and in particular Spain, and not because of any crisis in
Mexico and much less because of polls on the presidential race."

Ramirez suggested Mexico might be more vulnerable to events in
Spain because some of Mexico's largest banks are Spanish-owned. He said those banks account for 36 percent of deposits and 42 percent of profits in the Mexican banking system.

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