Tulsa World: Mexico currency hits record low

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Mexico currency hits record low

By VALERIE ROTA Bloomberg News
Published: 3/3/2009 2:35 AM
Last Modified: 3/3/2009 5:01 AM

Mexico's currency hit a record low for a third day Monday on concern that the worsening global recession will further erode dollar flows to Latin America's second-biggest economy.

The peso slid 1.1 percent to 15.4225 per U.S. dollar from 15.2550 on Friday. It slumped as much as 1.7 percent to 15.5105 per dollar.

Banco de Mexico failed to stem the drop in the peso after it purchased $400 million worth of its own currency at a local auction. A Mexican central bank survey published Monday showed that economists pared their forecast for the peso's gain this year for a sixth straight month.

"There are jitters hurting the peso amid the negative outlook for the global economy," said Jaime Ascencio, a fixed-income analyst in Mexico City at Actinver SA, the country's biggest independent money manager.

The peso joined a decline in all of the 26 most-traded emerging-market currencies.

Mexico's currency has tumbled 33 percent over the past six months, the worst performance among major currencies, as exports to the U.S. dropped and remittances slowed.

The decline in the Mexican peso has been excessive and the currency is undervalued, Finance Minister Agustin Carstens said Sunday. Foreign exchange reserves, which have been eroded by peso purchases from the central bank to prop up the currency, will increase this year, Carstens said. Banco de Mexico has spent more than $18 billion of foreign reserves since October in an attempt to stem the peso's slide.

Mexican exports to the U.S., the country's biggest trading partner, fell 15 percent in December from a year earlier, the U.S. Commerce Department said last month. Banco de Mexico said last week that remittances declined 12 percent in January.

Other Mexican government reports this month also showed that dollar flows from foreign direct investment fell 32 percent to $18.6 billion last year while revenue from foreign visitors fell 3.8 percent in the fourth quarter.

In the central bank survey published Monday, economists lowered their 2009 economic growth forecast, predicting that the economy will shrink 1.9 percent this year. They forecast a 1.2 percent contraction for 2009 in last month's survey. By VALERIE ROTA Bloomberg News

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