Mexico’s peso: Buckle up for a bumpy ride

The peso should buckle up for a bumpy ride for some time.
The peso should buckle up for a bumpy ride for some time.

By Jude Webber / Financial Times

What’s the one good thing about Mexico’s consumer confidence being poor? It should help prevent the country’s weakening peso from fueling inflation.

All eyes are on the peso at the moment, after monetary authorities launched a new intervention program on Wednesday to try to calm volatility and ensure liquidity as the dollar goes from strength to strength.

The peso has recently been hitting low after low, and has sunk 4.8 percent since the start of this year and 1.7 percent alone since March 6, Luis Videgaray, the finance minister, noted (though he was quick to point out that the peso’s falls are far smaller than those of the euro, and the peso had strengthened against other currencies).

Mexicans are certainly not used to a dollar costing on the way to 16 pesos, and there are expectations of further falls yet to come before the US Fed raises interest rates as it is expected to start doing in the coming months. But so far, the weak peso has not inflicted too much price pain.

http://blogs.ft.com/beyond-brics/2015/03/12/mexicos-peso-buckle-up-for-a-bumpy-ride/

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