Peso Dips to New Low Amid Continued Pessimism About Mexican Turnaround
Mexico’s peso slid to an all-time low against the dollar Tuesday, mocking government efforts to jawbone the beleaguered currency higher.
On spot markets it took a record 7.485 pesos to purchase $1, compared to 7.405 pesos Monday. The previous record low: 7.45 set on March 9. Traders said volume was extremely thin, so many were reluctant to suggest the peso was on the verge of a sharp new decline.
Nonetheless, dealers said both domestic and foreign investors were selling pesos in favor of dollars, amid continued pessimism about prospects for a quick turnaround in Mexico’s economy.
The forced devaluation undertaken by the debt-ridden Mexican government a year ago has plunged the country into deep recession and driven short-term interest rates above 50%.
Mexico’s Bolsa stock index, which rallied in summer on economic hopes, has been sinking with the peso recently. The index fell 19.30 points to 2,256.00 on Tuesday.
Major Mexican firms, in collaboration with the government, are said to be planning a peso defense fund worth as much as $5 billion.
Still, traders said investors aren’t convinced the fund will be enough to support the currency. “The government’s economic team hasn’t shown cohesiveness” in charting a way out of Mexico’s economic mess, one analyst said.