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Mexican Central Bank Plans to Support Peso

November 30, 2011 at 0:37 by Vladimir Vyun

Mexican PesoThe Mexican peso advanced today as the nation’s central bank pledged to support the currency in case it would decline too much.

Mexico’s currency exchange commission, which is made up from representatives of the central bank and Finance Ministry, said its going to use $400 million from its $140 billion reserves in case the peso would decline more than 2 percent in one day. The Mexican currency already has slumped 16 percent in the past six months. The Mexican peso is the worst performer among the currencies of Latin America and desperately needs support.

Mexico is not the first emerging economy to be worried about the weakness of its currency and that outlines the interesting difference between emerging economies and developed ones. The developed countries are trying to weaken their currencies, while emerging nations are attempting to support their currencies. The issues are opposite, but the reason for them seems to be the same: the global economic slowdown. The riskier currencies lose their value as investors prefer the safety of the developed nations’ currencies.

USD/MXN was at 13.7890 today as of 00:37 GMT after it fell yesterday from 14.0210 to 13.8120. EUR/MXN was down from 18.4081 to 18.3884.

If you have any questions, comments, or opinions regarding the Mexican Peso, feel free to post them using the commentary form below.

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