Banxico’s Garcia on the intervention unwind and FX hedging
The Bank of Mexico’s operations head explains why it’s removing its forwards hedges, and how it manages carry costs
When the inflow of dollars from Mexico’s national oil company started slowing in the mid 2010s, the Bank of Mexico (Banxico) had to be more cautious about its use of international reserves. So it looked to the USD/Mexican peso FX forwards market as an alternative way to intervene to stabilise the currency when required, but without draining its reserves.
On August 31, Banxico announced it would be winding down its short USD/MXN forwards positions that it had built up during its 2017 and 2020
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