Mexican Peso Hits 5-month High Against USD as Mexico's CB Offers New Details on Forex Hedges Auction

The Mexican peso spiked to its highest level in 2017 on Friday. At 6:30 a.m. EST, the USD/MXN exchange rate began to drop rapidly, hitting a 5-month low of 19.51926 (-2.84%) just two hours later.

The peso was boosted in part by news regarding Banco de Mexico’s new currency hedges auction.

The peso strengthened dramatically against the USD on February 21, 2017, when the Mexican central bank announced its $20 billion Forex hedges program, which was launched to combat excessive volatility in the Forex markets - particularly the rate of the peso vs. the dollar:

Today, Banco de Mexico unveiled further details on the first auction of the FX program, scheduled to take place next Monday (March 6th), where participating financial institutions will be given 2 minutes to send in their bids.

The first offering - a total of $1 billion - has been broken down into six different maturity categories, with the 30-day maturity tranche to be auctioned first:

- 30-day maturity: $200 million (due on Wednesday, April 5, 2017)
- 60-day maturity: $200 million (due on Friday 5, May 2017)
- 101-day maturity: $200 million (due on Thursday 15, June 2017)
- 178-day maturity: $200 million (due on Thursday 31, August 2017)
- 283-day maturity: $100 million (due on Thursday 14, December 2017)
- 360-day maturity: $100 million (due on Thursday 1, March 2018)

Volatility in the USD/MXN currency pair is also set to spike today as Federal Reserve Chair, Janet Yellen, gives her speech on the US economic outlook and interest rate policy.

Peso photograph by Richard Cawood