MEXICO CITY, July 3 (Reuters) - The slump in the Mexican peso to a record low this week has been “exaggerated” by global volatility but the currency should bounce back due to the outlook for Latin America’s No. 2 economy, Central Bank Governor Agustin Carstens told the state news agency.
Carstens, in an interview with Notimex late Thursday, said that the peso’s slump “could be a transitory phenomenon” related to global volatility and that Mexico’s solid fundamentals should support the currency.
Mexico’s peso has tumbled more than 15 percent since late last year on a collapse in world oil prices and bets that higher U.S. interest rates will draw investors out of emerging markets.
On Thursday, the peso hit a record low 15.8420 per dollar. Mexican inflation has continued to cool this year to a record low below 3 percent despite the peso’s losses and its impact on import prices as a sluggish economy contains price pressures.
Carstens said monetary authorities, which include the finance ministry, thought the peso market was operating in an orderly manner and with sufficient liquidity, Notimex said.
Mexico avoids direct intervention in its currency markets, but analysts at Banorte said in a note Thursday that Mexico’s currency commission could increase the amount of dollars it sells in auctions or take other measures to try and slow the peso’s slump if the currency breaks past 16 per dollar.
Carstens said the central bank was better prepared to face volatility due to any moves by the U.S. Federal Reserve after Mexico this week changed its own calendar of interest rate decisions to more closely follow upcoming Fed meetings, Notimex reported.
Reporting by Michael O'Boyle; Editing by Andrea Ricci