Mexico Steps Up Intervention After Peso Declines to Record

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Mexico said it would quadruple daily dollar sales to $200 million in an effort to prop up the peso, helping to reverse a slide that left the currency at a record low.

The central bank’s new pace of dollar sales will start Friday, according to a statement from the country’s currency commission. Since March, the pace had been $52 million. Separately, the central bank will reduce the minimum price decline needed to trigger an extraordinary dollar sale -- also for $200 million -- to 1 percent, from 1.5 percent now.

The currency commission, composed of officials from the Finance Ministry and central bank, stepped in after the peso tumbled earlier Thursday to an intraday record of 16.4890 per dollar. The peso is still down 9.3 percent this year, and officials probably are just trying to slow the decline, according to Win Thin, the New York-based global head of emerging-market strategy at Brown Brothers Harriman & Co.

“They just want to prevent disruptive moves,” Thin said in an e-mail. “We’re in the middle of a big emerging-market selloff.”

The peso increased 0.1 percent to 16.2689 per dollar as of 3:19 p.m. in Mexico City.

The peso is the most-traded currency in emerging markets, and it had been swept up in a selloff as U.S. economic data supported the case for higher interest rates from the Federal Reserve. Such global factors have added to pressure on the currency at a time when investors already have become disillusioned with Mexico’s prospects for an oil-fueled surge in foreign investment.

Extraordinary Auction

Finance Minister Luis Videgaray said in an interview Thursday on Radio Formula that the new measures were intended to prevent abrupt peso moves. He said he wouldn’t rule out further steps if warranted.

Earlier in the day, the central bank sold $200 million in an extraordinary auction, the third time the 1.5 percent threshold had been triggered since officials announced the program in December.

Investors are still betting on further depreciation. In the market for forwards, a type of contract that allows users to lock in future currency prices, traders are pricing in an exchange rate of 16.65 per dollar at the end of this year and 17.16 at the end of 2016, based on data compiled by Bloomberg.

At the start of 2015, the peso had been forecast to strengthen 9.3 percent this year versus the dollar, the most in the world. Instead, the currency has slid as traders used it as a hedge for everything from Brazilian corporate bonds to oil prices.

On the Chicago Mercantile Exchange, futures trades designed to profit from the currency’s decline have climbed to a record.