Selling USD – Not Enough To Defend Weak Peso Weighed By Trump

Mexican peso rebounded after posting a record low at 21.624 per dollar on Wednesday as Mexico’s central bank sold dollars in Mexico and New York on Thursday to prop up the currency.

According to market sources, the central bank sold at least $1 billion in U.S. currency in morning trade in an attempt to fight off the peso’s steep down rally to record lows amid fears U.S. President-elect Donald Trump’s protectionist policies could further hurt Latin America’s second-biggest economy. The bank kept the amount confidential.

Last year, the peso was among the world’s worst performing currencies after having dropped around 20% in the wake of Trump’s presidential victory. The Mexico’s central bank had to intervene in the forex market by selling $2 billion to rescue the sinking peso. Nonetheless, the intervention was short-lived and the currency continued to trend lower.

The central bank sold at least $1 billion in U.S. currency in morning trade. The bank kept the amount confidential. The dollar sales mark the bank’s first currency intervention since February 2016, when it sold $2 billion to prop up the sinking peso. The peso depreciated 20 percent last year alone and was among the world’s worst performing currencies.

This time, the peso decline is expected to extend as Trump is putting pressure on U.S. companies to not build factory in Mexico. In a tweet on Thursday, the Trump threatened Toyota Motor Corp with a “big border tax” if it builds a new factory in Mexico to manufacture cars for the U.S. market.

Trade suggestion

Buy Limit at 21.25000, Take profit at 21.60000, Stop loss at 21.00000

 

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