Posted by D on October 9, 2008, 9:24 am, in reply to "Re: peso/dollar"
I am not Boca Bob but did some notes........... |
There is a worldwide money crisis and the value of the peso is falling. The Peso is at a 16-year low, which means that it may be a good time to get more pesos per dollar exchanged. I could not find the good synopsis I was looking for; I know it is out there...So I pieced together a few links to try a semi educated guess
1) Why is the peso losing value against the US dollar, which is also losing value?
Mexico is a resource-based economy, most notably oil, which is hedged against the USD. Therefore, when the price of crude drops, the USD rises and most commodity based economies' currencies decline.
80% of exports go to the US
http://www.bloomberg.com/apps/news?pid=20601086&sid=aT3ktbnFEDQo&refer=latin_america The financial crisis has roiled markets across Latin America as concern has mounted that a recession in the U.S. will erode demand for the region's commodity exports and curb investment flows.
www.monstersandcritics.com/news/business/news/article_1435167.php/2ND_ LEADALL_Global_markets_dive_Europe_wrestles_over_common_tactic_ - Despite the US origins of the crisis, the US dollar rose as investors sought the security of greenbacks amidst the global chaos.
Investors sold off Mexican assets - www.chron.com/disp/story. mpl/world/6047976.html
2) How low will the peso go? If you knew that, you would be on TV and quite rich.
Prices for items here in Mexico are almost always listed in pesos and donít fluctuate just because a specific currency rises or falls.
Brazilian economist Flavio Serrano said, "It's a panic situation. . . . Everyone is looking at the international financial situation and coming to the conclusion that the only safe position is cash."
The question here is the cash of which country?
3) How crash resistant is the peso?
The central bank's $84.1 billion of foreign reserves. "This turbulence is hitting Mexico at a time when the government is still running a budget surplus, not a deficit," he said. "There is some local strength to withstand this pressure." He said Mexico's banks are not as exposed to the global crisis as others in the world that lend to foreigners, and he played down the devaluation.
This article - www.guardian.co.uk/business/feedarticle/7846982 - say's Mexico is taking action
Mexico's central bank on Wednesday broke with its long-held aversion to intervening in currency markets and offered to auction $2.5 billion and said it was setting up a daily dollar sales mechanism to halt the currency's dramatic plunge.
"The mechanism prevents big funds from pulling out, as we saw in the morning, and doing what they will with the market in moments of little liquidity," said Mario Copca, an analyst at MetAnalisis consultancy in Mexico City.
including building an oil refinery - http://www.guardian.co.uk/business/feedarticle/7847070.
Mexico's first in almost three decades.
Seems the Peso may end up more crash resistant than the US dollar, it just depends on how deep the problems are and where things end up.
Any links / info welcome.
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