Mexico Extends Intervention After Currency Hits Record Low

  • Banxico will continue $15 billion program through November
  • Peso trims losses on announcement after earlier falling 0.9%

Mexico will extend daily dollar auctions for two more months as global market volatility continues to pressure the most-traded emerging-market currency, its central bank said on Monday.

The peso trimmed losses after the statement was posted on Banxico’s website and was down 0.3 percent to 17.0183 per U.S. dollar as of 10:59 a.m. in Mexico City. It had earlier weakened as much as 0.9 percent.

Emerging-market currencies last week fell to their cheapest levels against the dollar since at least 1993 as low oil prices and weaker-than-forecast manufacturing data in China spurred concern that global economic growth is slowing. The peso hit a record low of 17.3425 per dollar on Thursday.

“It is the best thing that they can do," Win Thin, head of emerging-markets strategy at Brown Brothers Harriman & Co. said in an e-mail. The dollar-selling program is “meant to be a circuit breaker when markets get crazy."

The peso has fallen 21 percent against the dollar in the last 12 months, making it the sixth-worst performer among 24 emerging-market currencies tracked by Bloomberg.

Mexico will continue its dollar auctions until Nov. 30, the country’s foreign exchange commission said in a statement. The commission will decide before the end of November whether to extend the intervention, which so far has totaled $15 billion. Mexico’s international reserves have fallen 7 percent since April to $183 billion dollars.

“I was surprised by the final date, November 30, since volatility is likely to continue until the end of the year," said Marco Oviedo, chief Mexican economist at Barclays. “We don’t see the Fed raising rates and economic data out of emerging markets will continue to be negative, mainly from China."

The peso support program, started in December, offers one $200 million-dollar auction with no minimum price and a separate $200 million auction that is triggered whenever the peso weakens by one percent or more from the fixed rate defined by bank the previous day.

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