December 2, 2018 / 11:38 PM / 13 days ago

UPDATE 1-Mexican peso up after airport bond-holder report, U.S.-China trade truce

(Adds quote, details on airport report and background on project)

By Miguel Gutierrez

MEXICO CITY, Dec 2 (Reuters) - Mexico’s peso currency gained around 1.3 percent on Sunday in international trading, mostly in Asia, after local media reported there may be a solution for bond-holders tied to the financing of a scrapped airport in the capital.

Earlier on Sunday, several Mexican media outlets reported that construction on the partially built Mexico City airport canceled by newly sworn-in Mexican President Andres Manuel Lopez Obrador will continue pending the new government’s negotiations with the project’s investors.

Local media cited a two-page report detailing agreements made by the group building the airport, which noted that an offer to purchase up to $1.8 billion in bonds will be offered in New York on Monday.

Reuters could not verify the authenticity of the report, and Mexico’s finance ministry did not immediately respond to a request for comment.

The peso’s strengthened “not so much because the (airport) work continues, but because of the search for a financial outlet for bondholders, especially foreigners,” said James Salazar, a Mexico City-based economist with CI Banco.

Salazar added that an announced U.S.-China trade truce also helped push the local currency higher.

When Lopez Obrador announced his intention to cancel the airport in late October, he said he would heed the results of public consultation organized by his own political party that called for abandoning the project and instead convert a nearby military air base for commercial use.

The decision pummeled the peso and Mexican stocks, generating uncertainty over the fate of contracts already issued.

Lopez Obrador, sworn-in as president on Saturday, argued during the campaign that the new airport was tainted by corruption, though he never presented evidence, and would be expensive to maintain due to the complexity of the terrain. (Additional reporting by Frank Jack Daniel and Ana Isabel Martinez; Editing by Sandra Maler)

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