Last updateFri, 20 Nov 2020 11am

Central Bank acts to shore up plunging peso

The Mexican government intervened in world currency markets Thursday in a bid to halt the peso’s current slide.

Earlier this week Central Bank Governor Agustin Carstens announced that the government would sell $US200 million every time the peso dropped more than 1.5 percent from its level the previous day.

According to the Dow Jones Business News, on Thursday the central bank placed US$200 million at auction at an average price of 14.75  pesos to the dollar, and received bids for US$251 million.

By the end of the day, Mexico’s currency settled at 14.78 to the dollar – its lowest level since March 2009.

Intervention has become the government’s established method of preventing rapid currency depreciation that could lead to capital flight, hyper inflation and destabilization of the economy.

Financial experts believe the peso could come under further pressure as the year draws to a close.

The value of the peso, and many other currencies, has been affected by the  slump in the crude oil price, even though today oil accounts for only 11 percent of Mexico’s exports.

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