Mexican Peso Hits Lowest Level Against the US Dollar

A news story from ABCNews:

The Mexican peso has hit its lowest level ever against the dollar Wednesday, trading an average of 16.52 16.76 on the interbank market, the Bank of Mexico said.

The decline, the latest in a string of new lows this year, is due to pressure from falling oil prices and an anticipated interest rate hike in the U.S., MetAnalisis consultant Gerardo Copca told The Associated Press. He said it also was influenced by the poor performance of China's economy, which puts pressure on the exchange market.

The peso has seen a big fall this year despite efforts by the Central Bank to prop it up by auctioning dollars on the exchange market. The bank auctioned $233 million Wednesday, but it did not stop the currency from hitting the new low.

MetAnalisis statistics say the peso has depreciated 12 percent 13.6 percent in 2015.

Copca said a rise in U.S. interest rates creates a demand for dollars in the Mexican market to be shipped north, strengthening the price against the local currency. He said it's difficult to predict, but the peso "could continue to depreciate."

Bank of Mexico Gov. Agustin Carstens, in a column in the newspaper Reforma on Sunday, said the causes for the record drop are global and external to Mexico, with the dollar strengthening against currencies in both advanced and emerging countries.

"Our country is not among those hardest hit," he said, adding that despite the currency devaluation, Mexico is seeing low inflation and interest rates. He said the drop will be offset by financial stability and steady economic growth.

Mexico’s Peso Biggest Drop in a Year

Mexico’s peso tumbled the most in more than a year, prompting the central bank to sell $200 million to help stabilize the currency.

The peso fell 1.8 percent to 15.4726 per dollar, the biggest drop on a closing basis since August 2013, joining a slide of global counterparts. The Mexican currency is now at its lowest level in six years, approaching the record of 15.5892 reached in March 2009.

A report Friday showing strength in the U.S. labor market bolstered speculation the Federal Reserve is closer to raising interest rates, reducing the appeal of emerging-market assets that typically offer higher yields. The central bank’s dollar sales, held under a program started in December, usually are triggered when the peso falls more than 1.5 percent in one trading session. The last time the bank intervened was Dec. 11.

“I would increase the size of the daily auctions,” Eduardo Suarez, a strategist at Bank of Nova Scotia, said in an e-mail. “This is too broad-based. I don’t think you can stop a move like this.”

Central bank board member Manuel Sanchez said in a speech in Mexico City Friday that weakness in the peso is spurring inflation.

By Isabella Cota

Mexican Peso begins new period of depreciation against US Dollar

Posted by Peter L Brandt on January 24th, 2014:

The longest term chart shows that the Peso has been in an historical trend of depreciation against the USD. The charts below shows the exchange rate — the number of Pesos required to purchase one USD. When I started trading the Peso at the IMM in the 1970s, the Peso was at a premium to the USD.

The Peso is coiling within a 5-year symmetrical triangle on the monthly chart. The key challenge within this triangle will be the 14.50 to 15.00 level. A clearance of this level will indicate that much greater depreciation of the Peso against the USD would occur — very possibly a move to 17.0 to 18.0. The last period of substantial depreciation was in late 2008. I am looking for a similar move within the next year or two.

World in a Box

John Rubino on December 7, 2014 wrote an article for DollarCollapse.com warns that "...giving an unlimited monetary printing press to a government or group of banks is guaranteed to produce a dystopia of ever-greater debt and more centralized control, until the only remaining choice is between deflationary collapse or runaway inflation.

We are told, "Increasingly, emerging market contagion is enveloping Latin America. The Mexican peso was hit for 1.6% Friday, boosting this EM darling’s loss for the week to a notable 3.0%. This week saw the Colombian peso hit for 4.3%, the Peruvian new sol 1.1%, the Brazilian real 0.9% and the Chilean peso 0.6%. Venezuela CDS (Credit default swaps) surged 425 bps to a record 2,717 bps. Brazilian stocks were slammed for 5% this week and Mexican equities fell 2.2%…"

The US Dollar now buys 14.36 Pesos. This is the highest in ten years since 15.566 to the dollar in March, 2009. (see chart)