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Mexico triggers U.S. Fed swap mechanism as peso suffers

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MEXICO CITY — Mexican financial authorities said on Monday they will activate a swap mechanism established with the U.S. Federal Reserve to support liquidity in the market as the peso currency suffered another day of sharp reverses against the dollar.

Mexico’s central bank said the funds from the $60 billion U.S. swap line would be used to carry out credit auctions in dollars with Mexican credit institutions. It will hold the first auction for up to $5 billion on April 1, it said in a statement.

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The Fed this month set up swap lines worth $450 billion with Mexico and eight other countries, part of efforts to help economies around the globe and ensure the world’s dollar-dependent financial system continues to function.

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The coronavirus outbreak and the sudden collapse in global oil prices have hammered the peso, which has lost about 27% against the dollar since the start of the year.

The currency weakened more than 5% on Monday before trimming some losses after the central bank’s afternoon announcement.

Mexico’s Currency Commission will keep evaluating operating conditions in the currency markets and will take additional steps when necessary, the central bank said. (Reporting by Mexico City Newsroom; Writing by Drazen Jorgic; Editing by Dave Graham and Dan Grebler)

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