Mexico to sell $52 million daily to stop peso slide

Mexico's central bank cut on Tuesday its economic growth forecast for this year due to an expected drop in oil production and lower external demand in the first quarter (AFP Photo/Yuri Cortez)

Mexico City (AFP) - Mexico's central bank announced it will sell $52 million per day over the next three months to stop the peso from sliding further after the currency reached historic lows.

The daily auction comes on top of a mechanism in which the bank sells $200 million on days that the peso drops by 1.5 percent from the previous day's closing price.

"The fundamental goal is to preserve the stability of the Mexican economy" and "ensure the order, the liquidity and the good functioning of the foreign exchange market," Finance Minister Luis Videgaray said in a speech.

Videgaray said the peso's depreciation was part of a global strengthening of the dollar due to market expectations that the US Federal Reserve will hike interest rates and the positive economic outlook of the United States.

The $52 million daily sale began Wednesday and will run through June 8 in order to slow the pace of the accumulation of international reserves, which have reached almost $200 billion.

The $200 million mechanism has been used twice since it was launched in December.

The new tactic appeared to slow the currency's slide on Wednesday as the peso closed at 15.76 against the dollar, clawing back 0.89 percent from the previous day, when it finished at 15.90.

The peso hit record lows in recent weeks, reaching the lowest point since March 2009, when the country was in recession.

The peso has depreciated by 4.8 percent since the start of the year, Videgaray said. But it has strengthened against the euro, the Canadian dollar and the Brazilian real.

Analysts say the peso's weakening against the dollar is also due to a sharp drop in global oil prices, which have forced Latin America's second biggest economy to slash its budget and reduce its growth outlook.