MEXICO CITY: Mexico’s central bank should keep providing liquidity to contain the peso’s fall, the bank’s governor said, days before dollar auction programs aimed at underpinning the currency are set to expire.
Mexico’s peso has slumped to a series of record lows in recent months, hit by fears that the U.S. Federal Reserve’s expected rate hike will drive investors to dump riskier emerging market assets.
To stem the currency’s fall, Mexico’s central bank offers $200 million in daily auctions as well as an additional $200 million when the current falls more than 1 percent from the previous day’s fix price.
Both programs are set to expire on Sept. 30. But Mexico’s currency commission, which includes the central bank and the finance ministry, has said it will decide whether to extend the program by the end of the month.
When asked on a local radio interview if the bank plans to continue its policy of selling dollars, Carstens indicated it would do so.
“Yes… it is important to continue giving liquidity to the market and putting a brake on the currency’s depreciation,” he said.
Mexico’s central bank held interest rates at a record low, flagging tame inflation, but signaled it is prepared to raise rates if a slump in the peso hits consumer prices.
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