- Title: Mexico peso falls to new low on Trump uncertainty, more weakening feared
- Date: 10th January 2017
- Summary: MEXICO CITY, MEXICO (JANUARY 10, 2017) (REUTERS) **** WARNING CONTAINS FLASH PHOTOGRAPHY **** MEXICO FINANCE MINISTER JOSE ANTONIO MEADE AND SECRETARY GENERAL FOR THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT JOSE ANGEL GURRIA AT NEWS CONFERENCE AUDIENCE AT NEWS CONFERENCE OECD REPORT ON MEXICAN ECONOMY GURRIA PRESENTING REPORT TO MEADE MORE OF AUDIENCE AT EVENT (SOUNDBITE) (Spanish) SECRETARY GENERAL FOR THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT JOSE ANGEL GURRIA, SAYING: "It is probably, I say inevitable that it (peso) continues to depreciate in light of the pressures and the Central Bank will seek to avoid (fluctuations) so that it is more orderly." MORE OF AUDIENCE AT EVENT (SOUNDBITE) (Spanish) SECRETARY GENERAL FOR THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT JOSE ANGEL GURRIA, SAYING: "What the exchange rate is reflecting in Mexico is the price of petroleum, the uncertainty of the global economy, an open economy which is growing 2% when Mexico depends crucially on international trade, of course Mexico is reflected in its exchange rate as well as in investments, considering the uncertainties coming from statements the next government of the United States." PEOPLE WALKING PAST BANK WITH EXCHANGE RATE WITH US DOLLAR ON WINDOW EXCHANGE RATE OF PESO TO US DOLLAR PEOPLE LOOKING AT EXCHANGE RATE VARIOUS OF US DOLLARS BEING COUNTED GURRIA DURING REUTERS INTERVIEW (SOUNDBITE) (Spanish) SECRETARY GENERAL FOR THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT JOSE ANGEL GURRIA, SAYING: "Let there be no doubt there will be impact on investment initially but what will happen is that the formula will be flexible. There will be adjustments in price, decreases and increases, depending on the adjustments of petrol producers, will it work better, are they well-disciplined and furthermore the global economy is very weak at the moment so there is less demand, absolutely. This is conspiring against prices." VARIOUS OF PEOPLE WALKING ON STREET NEWS STAND NEWSPAPERS REPORTING ON THE ECONOMY
- Embargoed: 24th January 2017 23:04
- Keywords: peso depreciation Jose Angel Gurria
- Location: MEXICO CITY, MEXICO
- City: MEXICO CITY, MEXICO
- Country: Mexico
- Topics: Currencies/Foreign Exchange Markets,Economic Events
- Reuters ID: LVA0015YI2IIR
- Aspect Ratio: 16:9
- Story Text: Mexico's peso slumped to a new low against the dollar on Tuesday (January 10), fuelled by concern about the policies of U.S. President-elect Donald Trump, and comments by an economic think tank that further depreciation is "almost inevitable."
The peso was the worst-performing major currency last year, weakening 20 percent against the dollar as Trump closed in on the U.S. presidency. It skidded further to a low of 21.8275 per dollar by mid-afternoon, dipping 2 percent.
The depreciation has accelerated in the first few days of 2017 after Trump told major automakers last week to expect high taxes on vehicles made in Mexico that are sold in the United States as he attempts to bring back manufacturing jobs.
As long as uncertainty persists about what Trump will do once he takes office on January 20, the peso could face more pressure.
"It is probably, I say inevitable that it (peso) continues to depreciate in light of the pressures and the Central Bank will seek to avoid (fluctuations) so that it is more orderly," said Jose Angel Gurria, secretary general for the Organization for Economic Co-operation and Development at a news conference in Mexico City.
The peso has fallen by more than 5 percent against the dollar since January 1, according to Reuters data.
Gurria, who served as Mexico's finance minister from 1998 to 2000, said Mexico's central bank, which sold $2 billion in dollar reserves last week to support the peso, had helped prevent a deeper crash. But he warned it could not burn through too many greenbacks.
Gurria said Mexico's exchange rate is a reflection of the wider global economy, including statements from Trump's incoming government.
"What the exchange rate is reflecting in Mexico is the price of petroleum, the uncertainty of the global economy, an open economy which is growing 2% when Mexico depends crucially on international trade, of course Mexico is reflected in its exchange rate as well as in investments, considering the uncertainties coming from statements the next government of the United States," he added.
Trump has vowed to withdraw from a joint trade deal with Mexico if he cannot renegotiate it in the United States' favour, and he has threatened hefty tariffs on Mexican-made goods.
Many analysts fear the peso's fall is fuelling higher inflation, which picked up to its fastest pace in 2 years last month.
Consumer prices could be further fanned by a double-digit gasoline price hike this month that has spurred protests, looting and road blockades.
Gurria told Reuters this would impact investments.
"Let there be no doubt there will be impact on investment initially but what will happen is that the formula will be flexible. There will be adjustments in price, decreases and increases, depending on the adjustments of petrol producers, will it work better, are they well disciplined and furthermore the global economy is very weak at the moment so there is less demand, absolutely. This is conspiring against prices," he said.
Amidst economic uncertainty, Mexico has held firm against Trump's comments that Mexico would repay the United States for the wall, a day after news emerged that his transition team was exploring getting the Republican-led Congress to vote to approve funding.
Mexican Foreign Minister Luis Videgaray has restated the government's position that his country will not pay for the wall, and he noted that uncertainty over future trade relations is impeding investment to Mexico. - Copyright Holder: REUTERS
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