Mexico peso falls to record low on US bank worries

[Joanne98]

MEXICO CITY, Feb 19 (Reuters) - Mexico's peso fell to a record low on Thursday and stocks dropped to their weakest level in three months on worries about the fate of the beleaguered U.S. banking sector.

Mexico's peso gave up early gains to slump to 14.77 per dollar in late afternoon trade.

The benchmark IPC stock index .MXX closed down 0.31 percent at 18,682.47 points, its lowest level since Nov. 21, 2008.

Investors sold shares on concerns that U.S. government plans to mop up bad assets from their books may not be enough to revive lending and help the U.S. economy recover.

Adding to the gloom, U.S. data showed jobless claim benefits climbed to a record high and a separate report detailed a sharp drop in factory activity in the Mid-Atlantic region, depicting an economy in deep recession.

RBS analyst Flavia Cattan-Naslausky said there was a risk the peso could sink quickly past 14.90 per dollar if investors decide U.S. government plans to help the economy and shore up weak banks are insufficient to prevent a deep recession.

"If the market suddenly realizes that the U.S. is going to suffer for a while, Mexico will sell off precisely because of its connection to the United States," Cattan-Naslausky said.

http://www.reuters.com/article/usDollarRpt/idUSN1953157620090219