Published On: Wed, Feb 22nd, 2017

Mexico will use dollar ‘hedges’ to try to shore up peso

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Mexico’s foreign exchange commission said on Tuesday Feb. 21 it will offer up to $20 billion USD in currency hedges as it seeks to tame volatility it said has unfairly battered the peso, Reuters reported.

“In the last months, the peso exchange rate against the U.S. dollar has shown high volatility that is not consistent with the country’s economic fundamentals,” the commission said in a statement.

The FX commission is made up of top officials from the central bank and the finance ministry.

A picture illustration shows Mexican pesos and U.S. dollars. PHOTO: REUTERS/Edgard Garrido

A picture illustration shows Mexican pesos and U.S. dollars. PHOTO: REUTERS/Edgard Garrido

The commission said the program will not use the central bank’s international reserves, suggesting it will be similar to derivatives offered by Brazil’s central bank.

The commission said the first auction of the new instruments will be on March 6 for up to $1 billion USD.

The country’s peso has repeatedly fallen to record lows since last year, deepening losses after the election of Donald Trump as U.S. president due to his threats to impose trade barriers on U.S.-bound Mexican goods.

Source: reuters.com

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