Mexico peso firms to 2-year high on U.S. rate view

(Recasts, adds closing prices)

MEXICO CITY, April 10 (Reuters) - Mexico's peso firmed to a two-year high on Thursday after gloomy economic data led investors to bet the Federal Reserve will further cut U.S. interest rates.

The peso MXN= MEX01 strengthened 0.34 percent to 10.539 per dollar at the central bank close. In the stock market, the benchmark IPC index .MXX closed up 0.74 percent to 31,649.05 points.

Poor data in the United States on trade, jobless claims and retail sales reinforced expectations that the United States was slipping into a recession, and the Fed would lower rates to limit damage to the economy.

Lower rates in the United States make assets denominated in pesos more attractive to yield-hungry investors. Investors are betting that Mexico's central bank could keep interest rates steady for the next few months.

On Wednesday, data in Mexico showed inflation there had shot past the limit the central bank considers acceptable.

"The outlook on inflation in Mexico is more or less negative and allows for the view the central bank will not cut rates in the coming months, so people can double their bets in the local market," said Benito Berber, senior economist covering Latin America at RBS in Stamford, Connecticut.

Traders said the peso, trading at levels not seen since March 1, 2006, also was boosted by optimism that Mexico's Congress could approve a long-awaited energy reform proposal that President Felipe Calderon submitted this week.

"Energy reform is likely to be passed, even though it could end up being watered down," Berber said.

In debt trading, the price of the benchmark 10-year government peso bond MX10YT=RR was flat, bidding 101.702 with a yield to 7.49 percent.

In stock trading, dominant cell phone operator America Movil (AMXL.MX) gained 0.87 percent to 33.52 pesos, while its New York-traded shares (AMX.N) were up 1.4 percent at $63.76.

Mexico's biggest retailer, Wal-Mart de Mexico (Walmex) (WALMEXV.MX), rose 1.10 percent to 45.99 pesos.

Shares of Banorte (GFNORTEO.MX), Mexico's fifth largest bank, gained 3.96 percent to 49.04 pesos. (Reporting by Michael O'Boyle and Vanessa Padilla; Editing by Leslie Adler)