| | |  Business News | April 2009 
Mexican Peso Posts Its Best Weekly Gain Since 1995 on Swap Line
 Valerie Rota - Bloomberg
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Mexico’s peso rose, posting its best weekly gain since April 1995, after the central bank said it plans to tap a $30 billion swap line with the Federal Reserve.
The peso surged 1.4 percent to 13.56 per U.S. dollar at 5 p.m. New York time, compared with 13.7520 yesterday. It earlier touched 13.5107, the strongest since Jan. 8. The peso rose 5.8 percent this week, leaving it up 13.2 percent in the past month.
“The use of the swap line is going to really help buoy liquidity in the market,” said Alejandro Hernandez, who oversees 11.4 billion pesos ($841 million) in fixed-income assets at Grupo Financiero Interacciones SA in Mexico City.
Banco de Mexico said in a statement it will swap $4 billion and auction the funds in 264-day loans on April 21 to supply companies with dollars to meet their financing needs. The central bank will set a minimum rate of 0.5 percentage point above the overnight index swap rate in the auction and will seek an extension of the Fed line, which expires this year.
The central bank’s announcement comes after the government said this week it will seek a $47 billion credit line from the International Monetary Fund to help shore up foreign reserves.
The central bank plans to draw on the swap line “adds to the accumulation of good news,” said Benito Berber, an economist at RBS Greenwich Capital Markets in Greenwich, Connecticut.
Banco de Mexico today bought $100 million worth of pesos at two separate auctions. It has purchased $21.4 billion worth of pesos from its foreign reserves since October.
Yields on Mexico’s 10 percent bond due December 2024 fell two basis points, or 0.02 percentage point, to 7.92 percent. The bond’s price rose 0.17 centavo to 118.62 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1(at)bloomberg.net. |
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