Mexico's peso, stocks rebound from Dubai losses

MEXICO CITY, Nov 27 (Reuters) - Mexico's peso firmed sharply on Friday and stocks jumped as worries eased about the exposure of major global banks to Dubai's debt troubles.

The peso MXN= MEX01 firmed 0.66 percent to 12.895 per U.S. dollar while the IPC stock index .MXX gained 2.1 percent to 31,086, rebounding after sinking by the most in a month in the previous session.

"It appears that investors have understood that Western institutions access to Islamic financial markets was limited," wrote Salvador Moreno, an economist with ING in Mexico City, in a note to clients.

Markets around the world fell on Thursday when a possible debt default at a Dubai state-owned conglomerate sparked fears of renewed financial turmoil.

On Friday, shares in America Movil (AMXL.MX), Latin America's biggest cell phone operator, gained 4.15 percent to 31.61 pesos, recovering all of its steep losses on Wednesday, and then some.

Mexico's central bank left its benchmark interest rate unchanged at 4.50 percent for the fourth straight month as the economy pulls out of a deep recession and warned that tax hikes for 2010 will fuel inflation.

"The bank said the output gap will keep narrowing, but it will still be pretty wide, which will help keep inflation down," said a strategist in Mexico City.

The yield on the government's benchmark 10-year peso bond MX10YT=RR bid down 4 basis points to 7.84 percent. (Reporting by Michael O'Boyle; Editing by Andrea Ricci) ((michael.oboyle@thomsonreuters.com; +5255-5282-7153; Reuters Messaging: michael.oboyle.reuters.com@reuters.net))