Mexico peso falls over 1 pct to one-year low

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MEXICO CITY, Oct 2 (Reuters) - Mexico's peso currency fell more than 1 percent to a one-year low and stocks also slid on Thursday as investors remained on edge over frozen credit markets and a U.S. congressional vote expected Friday on a massive financial sector bailout bill.

The peso MXN= MEX01 slid 1.18 percent to 11.1086 per dollar, its lowest level since September last year. The benchmark IPC stock market index .MXX dropped 1.06 percent to 24,852 points.

"Everybody is really pulling back," said Win Thin, a senior currency strategist at Brown Brothers Harriman in New York, referring to investors in emerging markets.

Overnight money market stress eased in Europe on Thursday but lending rates remained above central bank targets, reflecting banks' lack of confidence in lending to one another.

The U.S. Senate endorsed a reworked version of a $700 billion bailout on Wednesday, two days after the House of Representatives rejected an initial plan that triggered the biggest slide in U.S. stocks in more than two decades. The House is scheduled to vote on the bill Friday.

Some market players have doubts the bailout plan will be able to stem the snowballing credit crisis that is spreading around the world.

"There's a lot of nervousness associated with whether the bailout package in the U.S. is going to do the trick," said Neil Dougall, an economist at Dresdner Kleinwort in London.

The U.S. Senate endorsed a reworked version of the bailout on Wednesday, two days after the House rejected an initial plan that triggered the biggest slide in U.S. stocks in more than two decades.

Investors are nervous about how what the House will act, in a vote expected on Friday, on a measure designed to loosen up lending and stave off turmoil in the broader economy.

Adding pressure to Mexican financial assets was a U.S. government report on Thursday showing the number of people filing for new claims for U.S. jobless benefits surprisingly rose in the latest week. The United States is Mexico's main trading partner.

(Reporting by Jason Lange, Editing by Walker Simon)