| | |  Business News | October 2008 
Mexico's Peso Declines for Eighth Day as Global Markets Plunge
 Michael J. Moore - Bloomberg
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 |  | This is all a function of contagion, and it's not a function of specific issues within the Mexican economy, so intervention will continue, but intervention will probably be less than effective.
- Alberto Bernal |  | | | |
Mexico's peso weakened for an eighth day as world financial markets plunged and central bank efforts yesterday failed to stem investor demand for the safety of U.S. dollars.
The peso plunged as much as 6.1 percent, a tumble that will trigger a $400 million dollar auction by the central bank. The bank sold $2.5 billion in the past two days and said it would offer an additional $400 million a day when the peso weakens more than 2 percent.
The peso was down 4.3 percent to 13.8113 per dollar at 9:20 a.m. New York time, from 13.2194 yesterday. It's down 29 percent from a six-year high reached on Aug. 4 and touched a record low of 14.2927 on Oct. 8. The peso's intraday decline that day of 13.8 percent was the biggest since the government abandoned a currency peg in December 1994.
Banco de Mexico is tapping into a near-record $84 billion of foreign reserves built up during a six-year rally in oil, the country's biggest export. Oil has tumbled from a record high of $147.27 a barrel reached on July 11, trimming Mexico's export receipts and adding to the peso's decline. Oil sank below $80 a barrel today as the worst financial crisis since the Great Depression cut into demand for energy.
The central bank offered $400 million in the foreign exchange market in three auctions yesterday. Each time the sale flopped as investors balked at buying dollars at the above-market rate the central bank was offering. The bank said it would offer the dollars at a rate at least 2 percent higher than the previous day's rate. At the time of the auctions, the peso was down less than 2 percent.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55(at)bloomberg.net |
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