Mexico: Mexican peso drops to lowest level since 2009
October 1, 2011
Sustained turmoil in global financial markets and the consequent flight to safety continued to weigh heavily on the Mexican peso (MXN). On 30 September, the peso traded at 13.88 per USD, which represents a severe 11.1% nominal depreciation over the 12.34 MXN per USD observed at end of August. In fact, the reading marked the lowest level since late April 2009 and followed the already strong 5.3% monthly decline tallied in August. At the current exchange rate, the peso records a 10.9% year-to-date depreciation. Similar developments have taken place in other emerging market economies, as renewed concerns about another global economic slowdown have prompted massive capital outflows from emerging markets to currencies and assets regarded as safe havens, such as gold and Japanese yen or Swiss franc denominated assets. Central Bank governor Agustin Carstens recently stated that the Bank maintains its intention not to intervene in the foreign exchange market, and that he remains confident the peso will rebound, as its medium-term value is well anchored below the current levels. Consensus Forecast panellists share governor Carstens' assessment and expect the Mexican peso to recover part of the lost ground in the months ahead.