March 16, 2020 / 3:10 PM / 17 days ago

UPDATE 2-Mexico peso hits new low after Fed coronavirus action fails to calm nerves

(Updates with comments from president)

MEXICO CITY, March 16 (Reuters) - Mexico’s peso fell to a historic low of 23 per dollar on Monday, as emergency measures taken by the U.S. Federal Reserve and other central banks failed to dispel fears the coronavirus outbreak would do serious damage to the world economy.

The peso fell more than 5% early on Monday to hit a new low of 23.051 per dollar, after initially rising against the greenback following the Fed move on Sunday. It later trimmed its losses and was currently trading at 22.835 to the dollar.

There have been more than 180,000 coronavirus cases worldwide and over 7,000 deaths. Mexico had 53 cases of the respiratory disease as of Sunday night, but no deaths.

Gabriela Siller, an economist at Mexican bank Banco Base, said the peso slide reflected concerns that the Fed action implied that a major blow to the economy was coming.

“As risk perception rises, capital moves towards assets considered safe havens,” Siller wrote on Twitter.

President Andres Manuel Lopez Obrador said that if Mexico suffered debt problems because of a peso depreciation, the state would “tighten its belt further,” but without hitting the welfare programs he has put at the forefront of his agenda.

“If it were necessary, the adjustment would be made in the government basically,” he told a regular news conference.

The Fed measures were aimed at stemming the fallout from the coronavirus outbreak, led by a reduction in U.S. interest rates to zero percent, the second rate cut in less than two weeks.

Lopez Obrador welcomed the Fed’s actions.

The Mexican central bank has not adjusted its rates since the moves by the Fed and other central banks.

Bank of Mexico Governor Alejandro Diaz de Leon said on Friday night that Mexico was in a different situation from the United States because of the depreciation of the peso.

He said then the central bank would take stock of all available data through March 26, when the board meets for its next scheduled monetary policy decision.

Lopez Obrador told the news conference he was not contemplating any stimulus for companies in response to the coronavirus crisis. But a multibillion-dollar energy plan due to be unveiled soon would lift the economy, he added.

The government is discussing that plan with the private sector, which has presented the government with a blueprint for projects worth some $92 billion.

Lopez Obrador said the plan would likely be presented at the end of this week or early next week.

Mexico’s peso is one of the most-traded emerging market currencies in the world, and has lost close to a fifth of its value against the dollar this year. (Reporting by Noe Torres and Dave Graham; Editing by Marguerita Choy and Peter Cooney)

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