Mexico's Peso Leads Losses as Global Rout Outweighs Dollar Sales

Updated on
  • Peso joins slide in emerging-market currencies and equities
  • Banxico sells $400 million in a bid to bolster currency

Mexico’s peso led losses among the world’s major currencies as a rout in emerging markets overshadowed central bank sales of $400 million to support the currency.

The peso sank 1.2 percent to 18.6714 per dollar, the most among 16 major currencies tracked by Bloomberg. Its 7.8 percent slide since the end of December marks the worst start to any year since the 1993 redenomination.

Mexico’s currency joined a slide in developing nations Monday amid deepening concern over the health of the global economy. Traders often use the Mexican peso to hedge against other risks because it trades all day, has high volume and is cheap to borrow. For that reason, the most-traded emerging-market currency ends up being more vulnerable to swings when investors flee riskier assets.

“The peso is being hit by broad emerging-market pressure,” Eduardo Suarez, a Latin America strategist at Bank of Nova Scotia, said in an e-mail. “There could be some proxy hedging going on.”

Regular intervention by Banxico hasn’t tamed expected swings in the currency, with one-month implied peso volatility surging to a more than two-year high. The central bank said Jan. 28 that it would extend through March its program of offering $200 million daily in auctions triggered when the peso weakens by 1 percent from the previous day’s fixed rate and an additional $200 million when the currency weakens 1.5 percent.

Earlier on Monday, Banxico sold $200 million at an average exchange rate of 18.6446 pesos per dollar as part of the program and then another $200 million at 18.7292 pesos per dollar.

— With assistance by Adam Williams

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