A Mexican Standoff: Banxico vs. The Fed

8/6/15 Forbes
5504964078_df874cacb5_zBanxico, the Mexican central bank, is widely expected to raise interest rates alongside the Federal Reserve in the upcoming hiking cycle to avoid further weakness in the Peso (MXN).  There was even speculation that Banxico would preemptively hike during last week’s policy meeting. Policymakers ended up keep rates unchanged at an all-time low of 3.0%, but the central bank did take steps to buoy MXN.

The central bank increased the amount of dollars to be auctioned daily from $52 million to $200 million. They also reduced the amount MXN has to weaken for the central bank to sell an additional $200 million from 1.5% to 1%. MXN reacted immediately to the announcement, jumping 1.2% against USD, which is a notable move for the world’s most traded EM currency.

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Mexico to Sell Dollars to Support Peso

By Anthony Harrup, Wall Street Journal 3/11/15

dollarsThe Bank of Mexico will sell additional dollars to support the peso, which fell this week to its weakest level to date against the U.S. dollar, the foreign exchange commission said on Wednesday.

For the next three months, the central bank will offer $52 million a day at auctions, in addition to the $200 million it sells on days when the peso weakens 1.5% from the previous session’s fixing.

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Emerging Markets – Mexico’s Peso Rises on Greece Hopes, Germany Data

Reuters, 2/17/2015

mexico-pesoMexico’s peso rose slightly on Tuesday, as positive data from Germany and hopes that Greece will reach a deal to remain in the euro zone lifted the beleaguered currency.

Mexico’s peso rose 0.1 percent in early afternoon trading to 14.9175 pesos per dollar after data from Germany showed analyst and investor sentiment climbed in February to its highest level in a year.

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Update 3: Mexico Cenbank Holds Steady with Eye on Peso, Weak Growth

By Reuters, 1/30/2015

5504964078_df874cacb5_zMexico’s central bank on Thursday held interest rates at a record low as policymakers eyed the risk that a sharply weaker peso could fan consumer prices higher while also noting big risks to growth.

The bank kept its main interest rate at 3.00 percent, as expected by 19 of 20 analysts polled by Reuters.

Interest rate moves are not needed right now, Mexican Central Bank Governor Agustin Carstens said after the decision.

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Mexico’s Peso Tumbles to Weakest Since February on U.S. Outlook

10/15/14 Bloomberg News

Mexican pesoMexico’s peso fell to the weakest since February as concern that the global economy is slowing fueled a selloff in emerging-market currencies. The currency dropped 0.6 percent to 13.5315 per dollar today in Mexico City, the weakest on a closing basis since Feb. 3. Yields on fixed-rate peso bonds due in 2024 dropped five basis points, or 0.05 percentage point, to 5.76 percent, according to data compiled by Bloomberg. The peso’s drop was the second-most among major currencies. A report showed retail sales in the U.S., which accounts for about 80 percent of Mexico’s exports, fell a greater-than-expected 0.3 percent in September. An index of manufacturing in the New York area fell this month to its lowest since April.

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Videgaray Says No Need to Intervene as Mexico’s Peso Weaken

luis videgarayBloomberg, 01/24/2014

Mexico’s Finance Minister Luis Videgaray said there is no need to support the peso, which has fallen to its weakest in 18 months, because the market remains sufficiently liquid.

“The Mexican peso market is, fortunately, highly liquid and at the moment doesn’t require any support,” Videgaray said in an interview at the World Economic Forum in Davos, Switzerland. “We have a very liquid market and we don’t see the need to inject liquidity, to intervene.”

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Mexico peso hits 7-week high on energy reform optimism

peso by Guanatos GwynReuters, 12/9/2013

Mexico’s peso firmed sharply on Monday to its strongest level in seven weeks after lawmakers unveiled a more audacious than expected bill to open up state-run energy industries to greater private investment.

The peso gained 1 percent 12.8020 per dollar, its strongest level since mid-October.

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