Mexico peso hits 3-month low, market expects more intervention
By Michael O'Boyle
MEXICO CITY May 18 (Reuters) - Mexico's peso slumped to a three-month low on Wednesday, with the speed of its recent tumble sparking speculation the central bank could soon intervene to try and cushion the currency's fall.
The peso sank as much as 0.9 percent to 18.4510 per dollar, its weakest since February. The peso has lost nearly 7 percent this month, making it the second worst performer among the world's 36 most-traded currencies, behind the South African rand.
A prominent group of Mexican economists on Tuesday said the peso was under a speculative attack, and analysts said the country's central bank could soon sell dollars directly to the market, as it did in February.
"They are willing to use their firepower," said Alberto Ramos, an economist at Goldman Sachs in New York.
"You need to anchor the currency at some point, if the peso goes to 19 or 20 (to the dollar) that could change the inflation outlook and the central bank is very mindful of that," Ramos said.
By midday Wednesday, the peso had pared losses to trade 0.45 percent lower at 18.3625.
A sharp peso drop in February pushed Mexico's central bank to directly intervene in currency markets for the first time since 2009 and to unexpectedly raise interest rates after an unannounced meeting.
Then, Mexican policymakers said the peso was being targeted by electronic trading programs and that its losses did not match with the relatively sound position of the economy. Continuación...