BajaNomad

Peso takes record dive

makana.gabriel - 1-31-2009 at 11:27 AM

Peso takes record dive

WIRE REPORTS

The peso fell to a record low on Friday after a government report showed the U.S. economy shrank the most since 1982 in the fourth quarter.

The peso dropped 1 percent to 14.3333 per U.S. dollar, compared with 14.1848 on Thursday. It touched 14.4484, the weakest ever. The peso has fallen 4 percent this month, the sixth straight monthly decline.

"It's gotten hammered," said Win Thin, senior foreign-exchange strategist at Brown Brothers Harriman & Co. in New York.

"Each day we are hit with new surprises," Omar Martín del Campo of the brokerage Ve Por Mas told The Associated Press. "I have never seen the peso fall this much. It's historic."

The Banco de México offered $400 million in foreign reserves to try to bolster the battered currency, but no there were no bidders.

Mexican financial markets will be closed Monday, Feb. 2, for the observance of Constitution Day, and the volume of currency trading was also down, which experts say is typical heading into a holiday weekend.

"In general, peso traders prefer to go long on the dollar before the holiday because Mexico will not defend the currency" on Feb. 2, said Pedro Tuesta, an economist at 4Cast Inc.

The U.S. economy, the biggest buyer of Mexican exports, shrank 3.8 percent in the final three months of 2008, the Commerce Department said Friday.

But the U.S. Congress is currently debating a stimulus plan that, if passed, could help bolster the Mexican currency, analysts say.

"The peso will probably continue depreciating until the U.S. economic stimulus plan is approved," Mexico City-based brokerage Invex wrote in a report to clients.

The nation's economy will shrink 2 percent this year, after growing an estimated 1.5 percent in 2008, RBC Capital Markets said Friday.

Woooosh - 1-31-2009 at 11:37 AM

"The Banco de México offered $400 million in foreign reserves to try to bolster the battered currency, but no there were no bidders."

"The peso will probably continue depreciating until the U.S. economic stimulus plan is approved," Mexico City-based brokerage Invex wrote in a report to clients."


So how low will it go... 16:1 20:1 ?? With no buyers there is no way it can stabilize. Hang on- it's gonna hit the fan!

[Edited on 1-31-2009 by Woooosh]

makana.gabriel - 1-31-2009 at 12:01 PM

With this huge purchasing advantage, I am seriously thinking of buying a used VW or something in the interior. CA allows you to drive a MX plated car as long as you have a MX drivers license.

sancho - 1-31-2009 at 12:25 PM

So prices haven't been adjusted to reflect
the peso drop? seems in the past they
were. I was down last Aug., the peso
was actually gaining against the
dollar, trading at I believe slightly
under 9 to 1. Would a fmt tourist
card be $14 dollars or so?
Interesting thaught, Mex plate
with Mex drivers license

Bajahowodd - 1-31-2009 at 12:55 PM

I also experienced the 9 to 1 ratio last summer. Realizing that it is certainly not the only reason, but having a relative who works as an international currency trader for a major Wall Street brokerage, I was told something like this:
Just as stockbrokers will "short" stock and bet they will lose value, so do currency traders, betting on the ups and downs of the exchange value. Last years amazingly high value for the peso was caused in part by a flurry of buying by these traders. When the U.S. economy started to really tank, there was a massive sell-off of the Peso, as the U.S. is by far Mexico's biggest trading partner.

Government officials, financial institutions and the business press love to pull comments out of thin air about the causes of market fluctuations. But a significant cause of the fluctuations is the speculative trading for profit, whether up or down by these currency guys. It's like a casino without the house cut. Oops. In this case it's the brokerages that get the cut. Ever wonder why currency traders make six and seven figure incomes?

Worrisome, however, is that anything more than a short term trend tends to cause panic, and loss of faith, adding to the downward spiral.

Woooosh - 1-31-2009 at 01:13 PM

Quote:
Originally posted by sancho
So prices haven't been adjusted to reflect
the peso drop? seems in the past they
were. I was down last Aug., the peso
was actually gaining against the
dollar, trading at I believe slightly
under 9 to 1. Would a fmt tourist
card be $14 dollars or so?
Interesting thaught, Mex plate
with Mex drivers license


Prices are going up in Rosarto Beach restaurants already! The local "Pollo Asil" just plastered a sticker over their old sign raising the family meal deal from 200 to 223 pesos.

Bajahowodd - 1-31-2009 at 01:34 PM

What about the tolls on the Cuota?

Bob and Susan - 1-31-2009 at 01:45 PM

cars $2.10

dually $3.60

DENNIS - 1-31-2009 at 02:08 PM

The prices of imported goods in Mexico will rise as the peso falls. They have to. Domestic items and services, as long as they are free and clear of dollar influence will remain stable. That's the way it should be anyway.

Bajahowodd - 1-31-2009 at 02:16 PM

So that explains the 10% increase on the family meal deal in Rosarito? In a perfect world, domestic prices wouldn't necessarily rise. But human nature intercedes. How do I feel if my income or net worth just took a 40% hit? I'd raise the price of the goods or services I sell.

Bob H - 1-31-2009 at 03:39 PM

Quote:
Originally posted by Bajahowodd
What about the tolls on the Cuota?


We just got back last week... and on the way down we paid $1.90 for the toll road, a little more at the Ensenada booth.

Most of the places we went to South of Ensenada had not changed their pricing at all. It was very cheap to eat or drink anywhere, especially in Mulege!!

Bob H

islandmusicteach - 1-31-2009 at 03:43 PM

Has anyone bought construction supplies such as cement block since the currency crashed? I'm curious what a block's going for these days.

Woooosh - 1-31-2009 at 04:50 PM

Quote:
Originally posted by Bob and Susan
cars $2.10

dually $3.60


Yesterday my llave was out- so I paid cash. $1.90 (Playas to Rosarito Beach)

Woooosh - 1-31-2009 at 04:56 PM

Quote:
Originally posted by DENNIS
The prices of imported goods in Mexico will rise as the peso falls. They have to. Domestic items and services, as long as they are free and clear of dollar influence will remain stable. That's the way it should be anyway.


I thinking Pollo Asil sells only Mexican chickens, beans, tortillas and rice. Don't see much import exposure and the price of some of those items is regulated by the gov't.

My nephews are actually growing breasts and chest hair at 14 from eating so much hormone laden chicken- so I'm thinking the price increase is "just becasue they can"- not because they are paying more for Purdue chickens. :lol:

what about gas

BajaDanD - 1-31-2009 at 05:28 PM

how has this affected gas prices

Bajahowodd - 1-31-2009 at 05:54 PM

True enough that the government does control prices on a number of commodities. But holding the line on tortillas and petroleum is far from enough. It's going to interesting to watch a free market conservative such as Calderone as he navigates through this crisis that has only just begun

DENNIS - 1-31-2009 at 05:59 PM

Quote:
Originally posted by BajaDanD
how has this affected gas prices


They say gas prices are frozen so, in Pesos, the price won't change but, since we spend and think in dollars, the price will drop.

BajaGringo - 1-31-2009 at 07:11 PM

Actually the tolls are $1.90 at Playas and Rosarito and $2.10 at Ensenada...

Woooosh - 1-31-2009 at 07:15 PM

Quote:
Originally posted by DENNIS
Quote:
Originally posted by BajaDanD
how has this affected gas prices


They say gas prices are frozen so, in Pesos, the price won't change but, since we spend and think in dollars, the price will drop.


The peso is down 10:1 - 14:1. BUT, the price set for baja was higher per litre than the current price per gallon in San Diego. There has been a reversal of last summers trend by americans to buy baja gas. Too much math for me but probably come out about even.

Warning!

Bajahowodd - 2-1-2009 at 05:20 PM

The CATO Insititute is nominally a think tank populated by libertarian thinkers, but in reality, they are a mouthpiece for big, and I mean BIG business to alter public opinion, to support deregulation of just about anything. Their largest benefactors are petroleum and tobacco companies.

shari - 2-1-2009 at 07:51 PM

wood and metal prices have skyrocketed in the last shipment...imported building supplies from the states....darn.

Bajahowodd - 2-1-2009 at 08:29 PM

There's always adobe.

gnukid - 2-1-2009 at 09:20 PM

Quote:
Originally posted by makana.gabriel
With this huge purchasing advantage, I am seriously thinking of buying a used VW or something in the interior. CA allows you to drive a MX plated car as long as you have a MX drivers license.


You can buy a brand new vw from the dealer from under 10,000K out the door today in La Paz.

BMG - 2-2-2009 at 10:42 AM

Quote:
Originally posted by Bajahowodd
The CATO Insititute is nominally a think tank populated by libertarian thinkers, but in reality, they are a mouthpiece for big, and I mean BIG business to alter public opinion, to support deregulation of just about anything. Their largest benefactors are petroleum and tobacco companies.


True, the CATO Institute is primarily a Libertarian view think tank, but they are mostly supported by individuals (77%). The fact that Libertarian views are definitely free market economy would quite often put them on the side of business.

I'm not a currency speculator but it seems to me that the peso is not going to stop it's slide soon. BUT I'm the one who predicted the euro would never fly so don't use anything I say for investment purposes.:lol:

BajaGeoff - 2-2-2009 at 11:16 AM

Drove back from La Mision yesterday afternoon....tolls were $1.85 at the Rosarito and Tijuana booths.

DENNIS - 2-2-2009 at 11:19 AM

Quote:
Originally posted by BajaGeoff
Drove back from La Mision yesterday afternoon....tolls were $1.85 at the Rosarito and Tijuana booths.



Still 26 pesos which hasn't changed for a couple of years.

David K - 2-2-2009 at 11:22 AM

How about some February Pemex prices (sure miss BajaCactus' monthly posts)?

Pesos per Litre for Magna, etc. , and the exchange rate given at the Pemex station...

Thanks!

Gaucho - 2-2-2009 at 01:14 PM

Quote:
Originally posted by shari
wood and metal prices have skyrocketed in the last shipment...imported building supplies from the states....darn.


Have you considered building w/ the 3-D foam panels? They manufacture the panels in Mexicali and cement is avaiable all over BCS. No imported supplies!

Bajahowodd - 2-2-2009 at 01:18 PM

And no worry about termites!

BajaGeoff - 2-2-2009 at 02:46 PM

Quote:
Originally posted by DENNIS
Quote:
Originally posted by BajaGeoff
Drove back from La Mision yesterday afternoon....tolls were $1.85 at the Rosarito and Tijuana booths.



Still 26 pesos which hasn't changed for a couple of years.


True....but 26 pesos doesn't quite spend the way it did a couple of years ago!

Pato - 2-3-2009 at 04:47 PM

If one is holding a bunch of pesos, it probably would be safer sooner than later to change them to a different currency.

Bajahowodd - 2-3-2009 at 04:58 PM

If everyone followed Pato's advice, it would help to de-value the peso even more. Reminds me of when the FDIC announces they are taking over a bank. The accounts are insured, but you can bet there will be a line around the corner of people seeking to withdraw their money. Herd mentality of the ignorant.

Pato - 2-3-2009 at 06:15 PM

Honestly, I don't know. It's just a guess. I take it then that your own liquid assets are in MXP. I shouldn't want to save my own butt if it meant being part of that "ignorant" herd. You might be right that it's my responsibility to help shore up the US & MX banking systems. After all, they do represent our interests. What's good for GE & Telnor is good for me (as I count my stocks).
Oh wait, I don't have any :no:

Something to be said about that herd of Wall Streeteros wanting a piece of the US Treasury. Once one gets a bailout, they all want a bailout !
Aren't they being unpatriotic and pinko socialistas ?
Why should they get all the action ?

k-rico - 2-4-2009 at 07:34 AM

Peso takes a record dive? Good for me.

If it was 10 to a dollar and now it's 14, doesn't that mean I'm getting 40% more pesos per dollar? I live in Mex and work in the US on a daily basis (telecommute, never leave my home). Making dollars and spending pesos is a good deal and the staples of life have no where near increased 40%, if at all.

BTW, I did close my dollar account at Bancomer and moved the cash to Bank of America. Just in case.

your calculator... don't leave home without it!

Mulegena - 2-4-2009 at 09:21 AM

We got gasoline in Guerrero Negro yesterday and were short on pesos. The attendant wanted an 11 Peso to 1 Dollar exchange. When we naturally hesitated, he then said, "OK, 10." At that point we absolutely said , No way!". I whipped out my calculator, we cut a fair deal with the man and drove off into the sunset.

Woooosh - 2-4-2009 at 09:29 AM

Quote:
Originally posted by Bajahowodd
If everyone followed Pato's advice, it would help to de-value the peso even more. Reminds me of when the FDIC announces they are taking over a bank. The accounts are insured, but you can bet there will be a line around the corner of people seeking to withdraw their money. Herd mentality of the ignorant.


Mexican dollar bank accounts are insured now too. Many people won't trust the banks on either side- even though their accounts are safe. You can't move forward looking in your rear-view mirror- but I do understand it's an emotional issue for those who got wiped out before Mexican bank insured accounts. JMHO. (And, yes I have money in my dollar account here)

BajaGringo - 2-4-2009 at 11:23 AM

Quote:
Originally posted by Mulegena
We got gasoline in Guerrero Negro yesterday and were short on pesos. The attendant wanted an 11 Peso to 1 Dollar exchange. When we naturally hesitated, he then said, "OK, 10." At that point we absolutely said , No way!". I whipped out my calculator, we cut a fair deal with the man and drove off into the sunset.


The cardinal rule is ALWAYS have pesos to pay for gasoline. They rarely give you a fair deal on the exchange.