Mexico peso hurt by US outlook worries; stocks up
(Recasts; adds analyst comments, background)
MEXICO CITY, May 22 (Reuters) - Mexico's peso slipped on Friday, hurt by worries about the fiscal outlook of the United States which undermined investor appetite for emerging-market assets, but stocks rose, supported by gains in America Movil.
The peso MXN= MEX01 weakened 0.78 percent to 13.1725 per dollar from Thursday's final central bank reference.
Investors are concerned that the widening U.S. budget deficit and weakened economy could take the shine off typically safe-haven U.S. dollar-denominated assets. These worries also drove down the dollar and U.S. Treasuries on Friday.
"There could be a significant strain on the U.S. economy for a longer time than expected and that would be bad for all emerging market assets," said Nick Chamie, head of emerging market strategy at RBC Capital Markets in Toronto.
Mexico's economy is tightly linked to the United States, where a fall in consumer demand is hammering Mexico's exports, driving the local economy into is deepest recession since a mid-1990s financial crisis.
Citigroup unit Banamex said it now expects Mexico's economy to shrink 6.2 percent this year compared to a previous call of a 5.2-percent contraction, the brokerage said in a report published late Thursday.
The peso rallied to a six-month high earlier this week, breaking below 13 per dollar, but has slipped as Mexican companies fearful of another spike in the exchange rate rushed in to buy dollars, traders said.
"Companies are afraid the peso won't get any stronger," said Ramon Cordova, a trader at Base Internacional brokerage in Mexico City.
Volume was light ahead of the U.S. Memorial day holiday.
The IPC stock index .MXX rose 1.3 percent to 24,130 points, led by gains in America Movil (AMXL.MX), Latin America's biggest cell phone operator, which rose 1.47 percent to 24.80 pesos.
Mexico City based brokerage IXE said in a report that America Movil's Brazil unit reported a nearly 26 percent jump in subscribers in April, taking its total subscribers there to 39.8 million.
The weakening dollar drove up dollar-fixed metals' prices, lifting miner Penoles (PENOLES.MX) by 3.06 percent to 204 pesos and copper giant Grupo Mexico (GMEXICOB.MX) 2.07 percent to 12.31 pesos.
In debt trading, the government's benchmark 10-year peso bond MX10YT=RR fell 0.279 of a point, pushing its yield up 4 basis points to 7.76 percent.
Mexico's inflation rate slowed in early May, the central bank said on Friday, but core inflation continued to edge up. [nN22404723]
