(Recasts, adds background)
MEXICO CITY Aug 17 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
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)