Mexico's Peso Closes At Record Low Vs Dlr On Economic Worries

Mon, Mar 2 2009, 20:33 GMT
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Mexico's Peso Closes At Record Low Vs Dlr On Economic Worries

By Anthony Harrup

Of DOW JONES NEWSWIRES

MEXICO CITY (Dow Jones)--Mexico's peso sank to a new all-time low against the dollar Monday, triggering central bank dollar sales as pessimism about the world economy and financial-sector worries fueled risk aversion.

The peso was quoted in Mexico City at MXN15.4550 to the dollar around 3:15 p.m. EST. The Bank of Mexico's cut-off reference, at 2:30 p.m. EST, was MXN15.43 to the dollar, its weakest ever.

The peso remains under selling pressure despite central bank interventions in the market, including $400 million sold at an auction Monday at an average exchange rate of MXN15.3773.

Already negative sentiment was made worse by last Friday's downward revision to U.S. gross domestic product for the fourth quarter of 2008 to a drop of 6.2%. That was followed Monday by news the U.S. government will put up more money to support insurance concern AIG, which lost more than $60 billion in the fourth quarter.

"The contraction in economic activity of our principal trading partner implies less foreign currency inflows for Mexico with the reduction in exports, tourism and remittances," the Metanalisis research firm said in a report.

The Bank of Mexico said remittances fell 12% in January to $1.57 billion, while Mexico's exports in the first month of the year fell by 31.5% from January 2007.

Finance Minister Agustin Carstens, speaking at an event in Portugal, said Sunday that he sees the peso undervalued as the result of an "excessive market reaction."

Private economists surveyed by the Bank of Mexico last month lowered their average year-end expectation for the exchange rate to MXN14.10 from MXN13.50 in the January survey.

-By Anthony Harrup, Dow Jones Newswires; (5255) 5001 5727; anthony.harrup@dowjones.com

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(END) Dow Jones Newswires

March 02, 2009 15:33 ET (20:33 GMT)


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