Banxico: A bad news and a good news...

[ocelotl]

Official PDF document in spanish

Last friday Banxico Exchange Commision announced it would suspend the daily auction planned for the period August 1st to October 31st. On the above linked document they state that Mexican Government is buying 8 Billion USD "para cubrir anticipadamente las necesidades operativas de divisas del Gobierno Federal para los próximos meses" (to cover in advance foreign currency operative needs of Federal Government for the following months)

I don't know what sounds more like USD dumping, a sell of of central bank USD reserves, or a Federal Government of the same for budgetary or spending purposes... It could be worse for USD rate, like an announced anticipated liquidation of government external debt.

Both our Oliver (Carsterns) and Hardy (Ortíz) must feel very powerful now...

[Starving Steve]

Re: Banxico: A bad news and a good news...

For some unknown reason, there has been a noticeable strengthening of the US dollar in the past few days. This may be why oil is probing new lows around $120 per barrel.

My suspicion is that all of the central banks including the Bank of Mexico have been asked by Bernankee to support the US dollar. So this buying of the US dollar by the B. of M. of late would seem to support this hypothesis.

And of course, to-day, we had a statement by an OPEC official that oil should be worth around $78 per barrel. All of this nicely dove-tails.

I look at fundementals, not statements from high officials nor central bank currency manipulations, and the fundementals are that US Federal Reserve discount rates are 2% when they should be 12%. Other central banks have equally inflationary monetary policies. Also, the fundementals are that light oil is scarce and world demand for it is too high. Finally, the eco-frauds in the Sierra Club and Greenpeace have made it difficult to drill for new oil, difficult to refine oil, and difficult to develop meaningful new energy sources such as atomic power and hydro-electric power.

Therefore long term, oil is going up, and the cost of living is going to go up right with it. Only a worldwide depression would change this forecast, and the central bankers refuse to let a worldwide depression happen.