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Jude Webber in Mexico City

Mexico’s finance ministry and central bank said it was auctioning another $2bn in currency hedges under a programme the government expanded last week in a bid to boost liquidity and contain the fallout from the coronavirus crisis as the peso currency crashed further, breaching a new historic low of 24 to the dollar earlier on Wednesday.

The programme expanded the hedge to $30bn from $20bn and the ministry and central bank – which together make up the exchange commission – said in a statement that so far, $7.5bn had been auctioned.

“The exchange commission ratifies its commitment to continue evaluating operating conditions in the foreign exchange market and to take additional action if necessary,” it said.

After the US Federal Reserve and regional banks slashed interest rates, all eyes are on whether Banxico will hold an extraordinary meeting – its next rate-setting meeting is on March 26 – and whether it will follow suit. Mexico’s benchmark interest rate is at 7 per cent.

The finance ministry and central bank also said they would conduct liability management operations on Thursday.

President Andrés Manuel López Obrador appeared unruffled by the market turmoil, even though the exchange rate is one of his most closely-watched variables, and devoted his morning news conference to an update on one of his government’s signature projects – a new Mexico City airport, replacing the project he scrapped shortly before taking office.

“We think that the world economy will stabilise because the US government is intervening – there’s a direct, deep intervention … and they’re going to do everything to stabilise things … it’s in no one’s interest for there to be a world recession and economic crisis,” he told his morning news conference.

Mexico, whose economy is now forecast by private economists to contract by as much as 4 per cent this year, is also battling a plunge in oil prices, but the president said he would maintain and even boost some of his social policies “without increasing taxes, without the country getting into debt and without increasing fuel prices”. He said jobs were safe.

In another blow to the economy, carmaker Honda's temporary closure of North American plants includes two plants in Mexico.

Source : https://www.ft.com/content/5919c6fb-1f5f-315d-8353-94f04afcf340

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