Mexico Extends Currency Auctions Through January Amid Volatility

  • Currency commission says global market volatility may continue
  • Policy makers scrap daily dollar sales at no minimum price

Mexico will extend daily dollar auctions in a bid to damp volatility in the peso after the currency sank 18 percent in the past year.

The central bank said that it will continue offering $200 million daily in auctions triggered when the peso weakens by 1 percent from the previous day’s fixed rate. It will also offer an additional $200 million in daily sales that will occur when the currency declines by at least 1.5 percent. Meanwhile, policy makers suspended daily dollar sales they had been doing at no minimum price, citing a relatively more stable environment for global markets than when they introduced the practice in March.

The currency trimmed gains after the statement was posted on the central bank’s website and was up 0.6 percent to 16.6316 per U.S. dollar as of 1:55 p.m. in Mexico City. It had rallied as much as 1.1 percent.

“The changes are appropriate,” Juan Carlos Alderete, a strategist at Grupo Financiero Banorte SAB in Mexico City, said in an e-mail. “The adjustment comes at the right moment as it seems less likely to be needed going forward under the conditions that were in place up until today.”

Mexico’s peso has been swept up in an emerging-market currency rout that was fueled by concern the Federal Reserve would raise interest rates, thereby reducing the appeal of riskier assets. The changes to Mexico’s intervention program will let policy makers limit peso volatility on days when the currency falls significantly, while not intervening during stable trading sessions. The central bank’s reserves fell to $173.2 billion last week, $22.9 billion lower than the record set in January.

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