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Mexico has taken steps to safeguard its economy from the shock of US tariffs and authorities are working together in case liquidity in the currency market is affected, the country’s finance minister said.
The nation has enough international reserves to withstand the potential blow to exports and the economy is resilient, Finance Minister Rogelio Ramirez de la O said Monday in a call with investors, according to people with direct knowledge of the matter.
Shortly after Ramirez spoke, Mexico’s peso reversed sharp losses to gain as much as 0.6% when Mexican President Claudia Sheinbaum said she had a “good” call with US President Donald Trump, where they had agreed to postpone the 25% tariffs against Mexico for a month. Previously, the peso had been leading a selloff of emerging market currencies, tumbling to its weakest in nearly three years during Asian trading hours.
Mexico’s flexible exchange rate is acting as a natural buffer to tariff impacts, Ramirez said. A 10% depreciation of the peso from its fair value of 18.70 per dollar would curb the impact of 25% tariffs to around 12%, he said.
Ramirez said Mexico’s economy would likely slow, with manufacturing in autos and computing facing headwinds. He also pointed to about $44 billion in firepower from financing lines with the International Monetary Fund and US Federal Reserve.
Ramierz said the finance ministry was working with Banco de Mexico on currency market liquidity.
Mexico refrains from direct intervention in markets but the minister’s comments suggest that authorities could act if there are big one-day moves or if spreads between buyers and sellers widen too much, according to Marco Oviedo, a strategist at XP Investimentos. He added that Mexico was focused on liquidity and not a particular peso level.
“They are getting ready in case volatility increases too much and the market starts to perform poorly,” Oviedo said. “That is when intervention might be justified.”
--With assistance from Vinícius Andrade.
(Adds minister’s comments on exchange rate, analyst comments on intervention after third paragraph.)
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