Mexico peso hits 1-year high on US recovery hopes

* Peso firms sharply, closes at 1-year high

* Stocks boosted by U.S. home sales, jobs data (Adds closing prices)

MEXICO CITY Nov 25 (Reuters) - Mexico's peso firmed and stocks rose on Wednesday after better-than-expected U.S. jobs and home sales data bode well for a recovery in the United States, Mexico's top trading partner.

The peso MXN= MEX01 firmed 0.57 percent to 12.824 per dollar, its strongest close since Nov. 10, 2008, as the U.S. currency dropped to a 15-month low against the euro and a basket of currencies.

The IPC stock index .MXX closed up 1.3 percent to 31,364.04 points.

The peso gained for the third straight session since Fitch Ratings cut Mexico's sovereign debt rating by one notch, but revised the country's credit outlook to stable, quelling concerns of a further downgrade.

Mexico's currency has lagged the gains seen in other emerging market currencies this year due to the threat of a downgrade.

"Mexico's peso has been kind of catching up to the gains in other currencies that Mexico didn't have because we were concerned about the downgrade," said Greg Anderson, a Latin American currency strategist at Societe Generale in New York.

Data showed the number of workers filing claims for jobless benefits fell by a surprisingly large amount in the last week, while sales of newly built U.S. single-family homes in October rose to their highest level in a year.

Mexico sends around 80 percent of its exports to the United States and is counting on a strong recovery there to recover from the deepest local recession since the 1930s.

The peso has been unable to decisively break below the 12.80 level since it lost a quarter of its value late last year, but it has hit intraday levels just below.

But traders and analysts said they see the currency firming further even amid continued uncertainty about whether Standard & Poor's will follow Fitch with a downgrade of Mexico's debt.

"S&P has implied they want to wait a bit longer, until the first quarter. So maybe not today, and maybe not tomorrow, but the peso will be able to make it (past 12.80)," said Francisco Diez, director of emerging market trading at RBC Capital Markets in New York.

RBC sees the peso heading to 12.50 in the first quarter.

The peso has gained more than 4.5 percent since Nov. 6, boosted by signs U.S. interest rates could remain near zero well into 2010, making higher-yielding currencies more attractive.

The yield on the government's benchmark 10-year peso bond MX10YT=RR bid up 2 basis points to 7.82 percent after rallying to a six-week low on Tuesday in the wake of Fitch's downgrade and cooling inflation data for early November that was seen as curbing pressure on the central bank to raise interest rates.

In local stock trading, shares in America Movil (AMXL.MX) rose 2.31 percent to 31.50 pesos while copper miner Grupo Mexico (GMEXICOB.MX) added 4.57 percent to 31.57 pesos. ((Reporting by Michael O'Boyle, Editing by Gary Crosse)) ((michael.oboyle@thomsonreuters.com; +5255-5282-7153; Reuters Messaging: michael.oboyle.reuters.com@reuters.net))