Mexico peso firms to 2-year high, stocks fall

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MEXICO CITY, April 11 (Reuters) - Mexico's peso firmed to a two-year high on Friday as weak U.S. earnings and consumer data bolstered the chances of a U.S. rate cut and stocks fell as the data signaled a long slump in Mexico's main trading partner.

The peso <MXN=> MEX01 strengthened for a second day, gaining 0.12 percent to 10.526 per dollar, as the lackluster data made Mexican-denominated assets look more attractive to investors eyeing a U.S. rate cut.

The benchmark IPC index .MXX slipped 0.47 percent to 31,498 points, dragged down by wireless telecom operator America Movil (AMXL.MX: Quote, Profile, Research).

General Electric Co (GE.N: Quote, Profile, Research), a bellwether of the larger U.S. economy, on Friday lowered its 2008 earnings forecast and a Reuters/University of Michigan poll showed U.S. consumer sentiment fell to its lowest since 1982.

The news bolstered the view that the United States is slipping into a recession and increased expectations the U.S. Federal Reserve would likely lower interest rates further later this month to prop up the stumbling economy.

Lower rates in the United States make assets denominated in pesos more attractive to investors, as Mexico has relatively high yields.

"A lot of flows keep coming in with the bet that the Fed will ease rates again," one peso trader said.

Mexico's central bank is seen keeping interest rates steady for the next few months due to inflation pressures from high food and energy prices.