Mexico peso, stocks rebound on US mortgage aid plan

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Mexico's peso firmed on Thursday on news the U.S. government is hammering out a program to help troubled homeowners, while stocks fell, weighed down by losses in mobile telephone operator America Movil.

The peso <MXN=>MEX01 firmed to 14.495 after earlier weakening above 14.60 per dollar.

The IPC stock index .MXX closed down 0.45 percent, paring earlier losses of more than 1 percent.

News of a new plan by the administration of U.S. president Barack Obama to subsidize mortgage payments raised hopes of a more stable U.S. housing sector.

"This should help the U.S. economy, and obviously that will help us as well, since they are our main trading partners," said Antonio Magana, head of currency trading at Interacciones brokerage in Mexico City.

Most of the session was dominated by worries that U.S. government efforts may not be enough to stabilize the economy and the banking system.

Mexico sends around 80 percent of its exports to its northern neighbor and its economy is expected to languish in recession during much of this year due to the U.S. downturn.

In the equities market, shares in America Movil (AMXL.MX), Latin America's biggest cell phone operator, lost 1.78 percent to 21.46 pesos while its shares on Wall Street (AMX.N) shed 1.36 percent to $29.64. 

Bucking the broader market, shares in Wal-Mart de Mexico (WALMEXV.MX) rose 2.8 percent to 30.08 pesos. Brokerages upgraded the leading retailer after it posted better-than-expected quarterly earnings. [ID:nN12456416]

The peso was down 0.31 percent at 14.59 at the central bank's final 1:30 p.m. (1830GMT) reference but later gained.

The Mexican currency has lost nearly one-quarter of its value against the dollar since August as demand in the United States for local exports like trucks and flat-screen TVs fell.

The central bank made a landmark intervention in currency markets last week to defend the peso, which is expected to keep sliding despite the aid. [ID:nN12514724]

In debt trading, the government's benchmark 10-year peso bond <MX10YT=RR> lost 0.335 of a point in price, pushing its yield up 5 basis point to 8.46 percent, its highest since early December.

The peso's losses have sown doubts about how aggressively the central bank will cut borrowing costs to boost the flagging economy. (Reporting by Michael O'Boyle; Editing by Diane Craft)