Mexico's central bank sells $281 mn to ease volatility

Mexico City, July 25 (IANS/EFE) The Banco de Mexico said it auctioned off $281 million on the domestic market to reduce volatility in the exchange rate of the peso, which hit 14 per US dollar in June.

A total of $400 million was auctioned off Monday morning, of which $281 million was purchased at a "pondered price" of 13.56 pesos per dollar, the central bank said in a statement posted on its web site.

The US dollar was trading at 13.73 pesos Wednesday on the interbank market, after trading at 13.34 last Friday.

Since 2008, the central bank has had an auction mechanism in place totaling $400 million that is activated whenever the Mexican peso drops by 2 percent relative to the exchange rate the previous day.

Dollar auctions were reduced to $300 million in March 2009 and to $250 million in May of that year. They were suspended in April 2010 and resumed last November.

The central bank also implemented an options system for commercial banks to sell dollars to it in an effort to reduce dollar liquidity in the market.

The goal is to reduce uncertainty about lack of liquidity in the market that could cause sharp drops in the value of the peso, preventing macroeconomic contagion from spreading.

--IANS/EFE

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