Mexico: Central bank activates swap with Fed to support liquidity conditions
- Bank of Mexico to active swap line with the Fed, agreed on March 19.
- On Monday, the Mexican peso dropped sharply against the US dollar.
The Bank of Mexico said on Monday it would activate the swap mechanism established with the Federal Reserve to support liquidity in the market. The $60 billion swap line would be used to carry out credit auctions in dollars with Mexican credit institutions. The first action will be on April 1 for an amount up to $5b.
The liquidity arrangement between Banxico and the Fed was established March 19, “designed to help lessen strains in global U.S. dollar funding markets, thereby mitigating the effects of these strains on the supply of credit to households and businesses, both domestically and abroad.”
On Monday, the Mexican peso was the worst performer among the most traded currencies. USD/MXN pulled back modestly after the announcement but it was still up 3.50% for the day, trading near 24.00.