| | |  Business News | October 2008 
Mexican Central Bank Auctions $1 Billion to Boost Peso
 Traci Carl - Associated Press
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| | People walk under a sign from a money exchange house advertising the sale of the U.S. dollar at a rate of 12.35 Mexican pesos in Mexico City, Thursday, Oct. 9, 2008. Mexico's peso, which had been trading at fewer than 11 to the dollar for much of the year, hovered at about 13 per dollar on Wednesday morning and briefly hit 14 per dollar. It recovered ground after Mexico's central bank said it was auctioning off reserves. (AP/Eduardo Verdugo) | | |
Mexico City – Mexico's central bank sold US$1 billion in foreign reserves Thursday as its troubled currency again slipped to a new record below 14 pesos to the U.S. dollar.
Thursday's auction was one of the largest on record, drawing US$1.6 billion in bids at an average price of 13.2 pesos to the dollar. Within hours, the currency regained 4.6 percent to trade at 13.6, up from 14.3 on Thursday morning.
The global economic crisis has sent currencies falling around the world, but the peso has been among the hardest hit as many of the U.S. companies that are heavily invested in Mexico withdrawn assets to cover their own losses at home.
Mexico's central bank has spent US$13 billion, or about 15 percent of its foreign currency reserves, to boost the sagging peso since it first broke the 14-to-the-dollar mark on Oct. 8. It daily offers US$400 million at auction at the previous day's closing price plus 2 percent, drawing bids only when the peso's losses exceed the difference.
The peso's slide has caused Mexican companies to post huge losses on currency derivatives, for example pushing Comercial Mexicana, a supermarket company that operates the Costco chain in Mexico, to seek bankruptcy protection, while others appear set to default on loans.
Mexico's benchmark IPC stock index slipped 1.3 percent to 18,533 in midday trading Thursday. The index has lost about 25 percent of its value since the peso's slide began triggering derivatives losses in early October. |
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