Foreign purchases of Mexican debt triple in 2010

MEXICO CITY (Reuters) - Foreigners tripled their purchases of Mexican debt last year, investing $24 billion as low interest rates in wealthy nations made Mexican securities more attractive, central bank data showed on Friday.

The torrent of cash helped lift Mexico's peso currency 6 percent against the U.S. dollar last year and so far this year it has strengthened a further 2 percent.

At the same time, worries that money flows could quickly reverse have led Mexico to boost international reserves significantly, almost matching the inward flow of capital.

Mexican policymakers are especially eyeing the day the U.S. Federal Reserve eventually raises interest rates.

Mexico boosted international reserves last year by $23 billion, to $114 billion, according to data in the central bank's fourth-quarter balance of payments report.

"The objective is to have something that can absorb the shock," Finance Minister Ernesto Cordero said this week.

The amount of money foreigners sank into Mexican debt was well above the $8 billion reported in 2009 and also outstripped foreign direct investment, which includes money spent on new factories and equipment.

The yield on Mexico's benchmark 10-year government peso bond fell more than a percentage point in 2010 as demand for the security pushed its price higher. Its yield has been rebounding this year.

On Friday, the yield on the 10-year bond slipped 5 basis points while the peso gained 0.16 percent as falling oil prices eased concerns about the outlook for the global economy.

Mexico's main source of foreign reserves is oil exports, but the country currently also offers to buy up to $600 million every month in the market. Investors are keen to know if policymakers might change that amount.

The country wants to avoid violent shifts in the value of its currency. A sharp devaluation would make imports more expensive, fanning inflation.

Mexico is recovering from recession and the economy grew the most in a decade in 2010. The unemployment rate, adjusted for seasonal swings, fell to 5.23 percent in January from 5.55 percent the previous month, the national statistics agency said in a separate report.

The central bank data also showed Mexico posted a current account deficit equivalent to 0.5 percent of gross domestic product in 2010.

(Reporting by Jason Lange; Editing by James Dalgleish)