Forex Blog: Currency Trading News & Analysis.

February 5th 2009

Mexico Intervenes on Behalf of Peso

Most of the speculation in recent weeks concerning forex intervention has focused on Japan and Russia. The Central Bank of Mexico, meanwhile, has slipped quietly into forex markets to protect its battered Peso, which has fallen over 30% over the last six months. It's unclear whether Mexico's efforts, combined with support from the US, will be enough to stem further decline, considering that economic fundamentals continue to deteriorate. At the very least, the move serves as a symbolic warning to market bears, that the Central Bank is monitoring the situation, and is prepared to defend its currency accordingly. Mexico could also serve as a case study for other emerging market economies, most of which have witnessed minor runs on their currencies since the inception of the credit crisis. At the same time, it would be a mistake for them to assume that they could protect their currencies at fixed exchange rates, given Russia's recent failure to achieve such a result. Bloomberg News reports:

Russia “bungled by trying to draw a line in the sand,” said [one analyst]. “Emerging market currencies won’t see any relief till crisis is past.”

Read More: Mexico’s Central Bank Intervenes to Halt Peso Slide

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Posted by Adam Kritzer | in Emerging Currencies | No Comments »

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