President Andres Manuel Lopez Obrador on Wednesday said that Mexico’s central bank should stick to the reduction of its FX hedge program as announced in late August as the country has a stable currency.
(Bloomberg) — President Andres Manuel Lopez Obrador on Wednesday said that Mexico’s central bank should stick to the reduction of its FX hedge program as announced in late August as the country has a stable currency.
The bank’s decision to reduce its hedge program starting in September fueled declines by the peso at the time of the announcement, though it remains among the strongest emerging market currencies worldwide this year. AMLO, as the president is known, said he respected the bank’s autonomy and thought it should not return to hedging as it did before the adjustment.
“We have to have faith in the fact that we have a stable currency and that it has strengthened,” he said at a press briefing. “Now there was an adjustment, people thought that it was the end of the superpeso, and yesterday it again reached less than 18 pesos per dollar. The currency is doing well, and there’s a lot of faith in the economic strength of Mexico.”
In early trading in Mexico City on Wednesday, the currency reached 17.8522 per dollar at 9:03 a.m. local time. In 2023 to date, the peso has appreciated 9.3% against the dollar, the best performance among the world’s major currencies.
NOTE: Mexico Peso Nears Worst Day Since March as Banxico Unwinds Hedge
The hedge program was designed to tame volatility since its creation in 2017 and it was boosted in 2020 during the pandemic. Banco de Mexico had in late August around $7.5 billion of outstanding positions in those instruments. Analysts took the end of the bank’s hedge program as a sign that perhaps the currency had strengthened too much prior to the decision.
–With assistance from Carolina Gonzalez.
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