Mexico's cbank sells dol­lars as volatil­ity surges

The Pak Banker - - FRONT PAGE -

Mexico's cen­tral bank sold dol­lars at an ex­tra­or­di­nary auc­tion for the third time in four trad­ing ses­sions, tap­ping its re­serves in a bid to bol­ster the peso af­ter it tum­bled to a record low. Pol­icy mak­ers sold $200 mil­lion Mon­day at an ex­change rate of 17.1518 pe­sos per dol­lar, fol­low­ing sim­i­lar sales on Aug. 21 and Aug. 19. One-month im­plied volatil­ity on op­tions for the peso, re­flect­ing pro­jec­tions of price fluc­tu­a­tions, rose to 15.725 per­cent, the high­est since Septem­ber 2013.

Mexico's cur­rency is caught in a rout for de­vel­op­ing na­tions af­ter China's yuan de­val­u­a­tion sparked con­cern of a fur­ther global slow­down. The peso slid 1.2 per­cent Mon­day to 17.2011, weak­en­ing be­yond 17 for the first time since its 1993 reval­u­a­tion. "This is quite stun­ning, the volatil­ity that we've had," John Welch, a macro strate­gist at Cana­dian Im­pe­rial Bank of Com­merce, said from Toronto. "The mar­ket's a lit­tle bit pan­icky." On July 30, Mexico said 1 per­cent declines in the peso would re­sult in ex­tra­or­di­nary dol­lar sales of as much as $200 mil­lion, down from a pre­vi­ous trig­ger of 1.5 per­cent. Sep­a­rately, the na­tion's cur­rency com­mis­sion also quadru­pled daily dol­lar sales at no min­i­mum price to $200 mil­lion.

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