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MEXICO CITY Aug 17 (Reuters) - Mexico's peso weakened sharply on Monday as a selloff in Chinese stocks put investors on edge, adding to worries that this year's rally in riskier assets has outpaced real growth prospects.
The peso MXN=MEX01 lost ground for the second straight session, spiking above 13 per U.S. dollar in early trading, but bounced back to trade 1.07 percent weaker at 12.9845 per dollar.
Concerns the Chinese economy is overheating spurred a steep drop in Shanghai stocks. Japanese data showed the world's second biggest economy had pulled out of recession, but economists warned the recovery could be sluggish.
Investors were still fretting about data from Friday that showed U.S. consumer confidence fell in early August as well as news of the biggest U.S. bank failure so far this year. The United States is Mexico's top trading partner.
After lagging gains of other emerging markets, Mexico's peso has outperformed its peers in recent weeks on hopes it will benefit the most from the U.S. recovery. (Reporting by Michael O'Boyle; editing by Jeffrey Benkoe)