Dollar Drops Below 11 Pesos

The U.S. dollar’s value fell below 11 Mexican pesos Tuesday for the first time in a year, a sign that global investors continue to pour money into Mexico, bolstering the country’s financial markets and currency.

The peso’s strength is making Mexico somewhat less of a bargain for U.S. tourists, but it’s rewarding American investors in the nation’s stocks.

One dollar was worth 10.98 pesos in currency trading in New York on Tuesday, down from 11.02 on Monday and the lowest since March 2004.

The dollar’s value against the peso has been drifting lower since May, when one buck bought a record 11.7 pesos.

The Mexican government has been raising interest rates over the last year to curb inflation as the economy has accelerated. Higher yields on Mexican bonds, in turn, are attracting yield-hungry global investors.

“There has been a lot of flows into the peso bond market,” said Guillermo Estebanez, a currency strategist with Bank of America Corp. in Chicago.

A peso-denominated 10-year government bond offered an annualized yield of 9.86% on Tuesday, more than double the 4.39% yield available on a 10-year U.S. Treasury note.

The dollar still is worth far more in pesos than a few years ago. One dollar was worth about 9 pesos in March 2002.

The Mexican stock market has rallied sharply since August amid optimism about the economy. The benchmark IPC index hit a record closing high of 13,877.69 on Monday. It slipped 124.89 points, or 0.9%, to 13,752.80 on Tuesday.

The IPC is up 6.5% this year in peso terms. Measured in dollars, the index is up 8.2%, compared with a 0.6% gain for the U.S. Standard & Poor’s 500 index.

A stronger peso means Mexican stocks are worth more to U.S. investors when translated into dollars.