MercoPress. South Atlantic News Agency

Mexico lost 10% of international reserves to prop the Peso

The Mexican peso closed trading Wednesday at 12.74 to the US dollar, compared to 12.50 on Tuesday, with a depreciation of 1.8% having oscillated up to 12.82. The central bank on Wednesday morning auctioned 400 million US dollars as had been anticipated by government officials.

Last week in the midst of the collapse of world markets and capital fleeing from emerging economies the Bank of Mexico in three days pumped 8.9 billion US dollars to the money market to keep the local currency afloat. The sum was equivalent to 10% of international reserves which now stand at 75.121 billion US dollars reported bank authorities. Last Friday the Bank of Mexico said it was prepared to hold daily auctions of 400 million US dollars with the exchange rate 2% higher than the previous day. "Fluctuations can be expected to continue in the framework of global financial volatility; we are going to see much of the same in coming weeks", said Carlos Hermosillo a money market analyst. This is particularly true because of the extended fears regarding a serious recession in the US, which happens to be Mexico's main overwhelming trade partner. Mexico Finance Secretary also announced is was investigating banks and other public corporations with shares in the stock market to determine whether they complied with regulations regarding derivatives, highly sophisticated financial instruments which have been blamed for the Mexican peso serious depreciation of last week. Meanwhile the Mexican stock Exchange index, IPS, in line with Wall Street and other leading markets lost a modest 4.99%.