The peso hit historic lows on two consecutive days this week, closing Tuesday at 15.62 to the U.S. dollar.
According to BloombergBusiness, the drop was caused mostly on “speculation U.S. interest-rate increases will reduce the appeal of higher-yielding emerging-market assets as the drop in oil prices damps the outlook for foreign investment.”
The previous historic low of 15.49 was established on March 9, 2009.
On Wednesday, the peso rebounded by 1.3 percent to 15.42, its best one-day performance since early February.
Mexico’s central bank said Wednesday that it will support the peso by selling US$52 million in daily auctions over the next three months. The country has around US$200 billion in foreign currency reserves.
The Banco de Mexico will also continue its policy of holding daily auctions of US$200 million on days when the Mexican peso is 1.5 percent weaker than the previous day.
The peso has dropped almost 15 percent against U.S. dollar since last May.
The currency began its slide in the fourth quarter of 2014 as crude oil prices plunged. The downward trend has continued in the new year as positive economic signals in the United States suggested a Federal Reserve rate increase by the fall.
The Bank of Mexico has admitted that a sustained drop in the value of the peso could spur faster price increases. However, February’s inflation figures showed that prices rose less than anticipated and the three percent annual target to still be on track.
Perhaps the biggest fear for the Peña Nieto administration is that the faltering peso and drop in oil production will affect economic growth, estimated at 3.3 percent this year.
Despite the pressure on its currency, Mexico has fared better than some other emerging economies. The Brazilian real has dropped 26 percent in the past six months, while Colombia’s peso is down 25 percent.