UPDATE 4-Mexico central bank moves to defend peso, eyes weak economy

jueves 30 de julio de 2015 18:57 GYT

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By Michael O'Boyle and Alexandra Alper

MEXICO CITY, July 30 (Reuters) - Mexico substantially bolstered its intervention program on Thursday in an effort to defend the peso as the central bank warned that the currency could slump further after a recent string of record lows.

The currency commission, run jointly by the finance ministry and the central bank, said it would increase daily dollar auctions just as the country's central bank, Banco de Mexico, announced it had left its key interest rate at 3.0 percent, as expected.

The central bank said that the outlook for inflation, which cooled to a record low of 2.76 percent in early July, had improved in the short term, despite the peso's losses. But it also noted that economic prospects had worsened.

The commission said it would raise daily dollar auctions to $200 million from $52 million to support the peso, while also lowering the threshold of peso losses that can trigger the sale of an additional $200 million per day.

The peso tumbled to a record low of 16.4880 per dollar before the announcement, but it reversed losses to end slightly stronger from Wednesday at 16.2671. Analysts said the measures were more aggressive than expected and that they could help the peso stabilize.

Finance Minister Luis Videgaray told local radio that Mexico would take further measures if necessary.

Mexico central bankers said peso losses had been driven by uncertainty about when the Federal Reserve would raise interest rates, adding that global volatility could worsen.   Continuación...