The Mexican economy cannot get a break. First, you have the overall global recession which is worsened by the close connection with the US. Trade flows are down and financial flows from cash remittance back Mexico have decreased. Second, there is the ongoing problem of the drug trade. which has reduced foreign direct investment decisions. Third, they now have a problem of the swine flu scare. Surprisingly, the peso appreciated slightly before the swine flu problem. The peso was firming with a request to the IMF for a $47 billion credit and the tapping of a $30 billion swap line with the the Fed.
A problem with trading some of the emerging market currencies i the need to track the behavior of the IMF and their loan programs. The economics of the country are not enough if there is the potential for large credit line to change the economics of the government balance sheet of foreign reserves. In this case, the swap with the Fed and the IMF line would match the $79 billion stock of foreign reserves which are held by the Bank of Mexico. The credit line is a game changer for the economics of the currency market. This leads to surprise risk.
A problem with trading some of the emerging market currencies i the need to track the behavior of the IMF and their loan programs. The economics of the country are not enough if there is the potential for large credit line to change the economics of the government balance sheet of foreign reserves. In this case, the swap with the Fed and the IMF line would match the $79 billion stock of foreign reserves which are held by the Bank of Mexico. The credit line is a game changer for the economics of the currency market. This leads to surprise risk.
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