Mexico's Peso Falls as U.S. Housing Slumps More Than Forecast

By Michael J. Moore

Oct. 17 (Bloomberg) -- Mexico's peso fell after a housing report added to evidence that the U.S. economy, the biggest buyer of Mexican exports, is faltering under the strain of a global credit crisis.

The peso dropped 0.5 percent to 12.8925 per dollar at 9:10 a.m. New York time. Banco de Mexico bought $2.3 billion worth of pesos in the past two days, after purchases of $8.9 billion worth last week, in an effort to shore up the currency after it plunged to a record low of 14.2927 on Oct. 8.

Construction began on 817,000 houses in the U.S. last month, down 6.3 percent from August's 872,000 level, the Commerce Department said in Washington. Building permits, a sign of future construction, dropped 8.3 percent to 786,000 pace, the lowest level since November 1981.

Banco de Mexico policy makers will leave their benchmark overnight lending rate at 8.25 percent at a meeting today, according to 18 of 20 economists surveyed by Bloomberg. The bank is slated to announce the rate at 10 a.m. New York time. The other two analysts predict a cut.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net