Chapter 208 The Distressed Mexican Government

  In the following two days, large peso sales orders appeared in the foreign exchange market, which made market participants smell something different.

Most of the foreign exchange market is composed of commercial banks. They give inquiries and prices by telephone, and generally only report three to four digits after the decimal point. However, when the Mexican market is linked to the US dollar, no more than 4 digits are given. % fluctuation space, so three to five digits after the decimal point should be mentioned when quoting.

  For example, if an institution that sells U.S. dollars calls to ask for a quotation, the counterparty to the transaction will usually answer: "856-880", which means that the buying price is 0.28880 U.S. dollars for 1 peso, and the selling price is 0.28856 U.S. dollars for 1 peso. Among them, 0.00024 is the exchange difference, which is the fee charged by the bank for currency exchange.

Generally in the foreign exchange market, the trading department of the bank relies on this frequent trading to earn the exchange rate difference, because the exchange rate difference is too small, so it needs to be operated frequently, which is the same as bond trading .

However, foreign exchange traders soon discovered that there were more and more Mexican peso selling orders in the market, while the corresponding buying orders did not increase much. This situation made them quickly reduce the peso quotations and increase the exchange rate difference to earn Bigger profits.

  The quotation of the peso against the U.S. dollar began to rise from the lowest point of 0.28856/0.28881, and broke through the 0.28890 mark. The Mexican peso reached the price of 3.4514 pesos to the U.S. dollar.

   "What happened?" Traders asked each other, all wanting to know what happened, how the peso fell so much in such a short period of time.

   Zhongshi, who had already come to the United States, looked at the new high reported on the disk, and was unmoved in the slightest, still letting the foreign exchange traders in the bank continue to sell.

   "Mr. Zhong, the current quotation is too high, should we wait?" Although Zhong Shi issued a trading order, a slightly older trader still persuaded him.

His name is García Carlos. He is of Mexican and American descent. His facial features are extremely sharp and his appearance looks rough. However, Zhong Shi found that he is extremely shrewd in foreign exchange transactions through two days of observation. Entering the market when the peso suddenly went higher was very well timed.

According to Garcia's estimation, under such circumstances, the Bank of Mexico will intervene in nine out of ten cases to bring the value of the peso back to the normal fluctuation range. At that time, it can be exchanged when the peso rises. Exchange some more dollars.

  Although the exchange rate difference has reached five digits after the decimal point, the amount of pesos that Zhong Shi wants to exchange is really too large, as high as 27 billion pesos. One of the price savings, the amount of US dollar capital that can be exchanged is very considerable.

   "There is no need for this!" Zhong Shi shook his head slightly, and flatly rejected Garcia's opinion, "Although the peso is weak now, I am eager to exchange and don't care about the price difference."

  After several days of exchange, half of the pesos on Zhong Shi's hand have been exchanged, and the returned US dollar capital has reached as much as 4 billion US dollars. But now there are less than four days before the Mexican government announces the devaluation, and he needs to exchange all the pesos in his hands into US dollars as soon as possible.

  The net outflow of $4 billion has caught the attention of the Bank of Mexico, especially with the new government in office and the outlook for foreign exchange policy is still unclear. In fact, the outflow during this period was more than 4 billion U.S. dollars. According to the preliminary estimate of the Bank of Mexico, the outflow of U.S. dollars was as high as 6 billion U.S. dollars. It was only after the Bank of Mexico intervened several times that some U.S. dollar capital flowed back into the Mexican market, allowing these foreign exchange management The department considers it to be a normal arbitrage transaction.

   Seeing that the young man in front of him didn't listen to his opinion, Garcia sighed secretly, shook his head helplessly, and then waved his hand to let his team continue to sell Mexican pesos.

He is a foreign exchange trader at Chase Manhattan Bank. This time, he is seconded to Tianyu Fund to help them exchange pesos. This is also Zhong Shi's request, because Tianyu Fund lacks manpower in foreign exchange, and can only use this outsourcing method. Borrow talent.

  In addition to helping Tianyu Fund exchange pesos, Garcia has another purpose, which is to find out the real intention of Tianyu Fund. Although Zhongshi hinted at Chase Bank, HSBC and Standard Chartered Bank that the value of the Mexican peso will change significantly recently, several banks did not really pay attention to Zhongshi's opinion after research.

  They also never imagined that Zhongshi would be so "arrogant" that he would attack a country's currency system. It must be known that the total capital of Tianyu Fund is only two billion US dollars, which is not even a fraction of Mexico's foreign exchange reserves. Therefore, after being courteous, they just reported the situation to their respective foreign exchange departments, and they became the hands-off shopkeepers.

  Each company has its own reasons, but there is only one core point, that is, as long as there is no major fluctuation in the Mexican capital market, there will be no possibility of depreciation of the peso. Because of the net inflow of foreign capital into Mexico, as much as 76.8% of the capital was invested in the Mexican securities market. In this case, as long as investors maintain confidence in the government and the market, there will be no large-scale capital outflows. If there is no large-scale capital outflow, the value of the peso will continue to strengthen.

Although Standard Chartered's approach is different from the other two, their exchange rate is not much higher. First, there is not much US dollar capital invested in Mexico through their channels, and second, they hold US dollars. The cost is there. Now the one-year US dollar interest rate is as high as 5.5%. If you can’t lend out in one day, you have to pay the corresponding interest. Even a multinational bank like Standard Chartered must consider the cost issue.

  Although he is very dissatisfied with the practices of these banks, Zhong Shi knows that they are also bound by various factors and cannot do whatever they want like him. It is just that they missed such an opportunity this time, and I don’t know if they will regret it.

Others may not think anything of this seemingly innocuous foreign exchange attack, but Zhongshi has been keenly aware that the Bank of Mexico intervenes more frequently and with greater intensity . In the past two days, the Bank of Mexico has put a said 1 billion US dollars of foreign exchange reserves on the market, working with other commercial banks to stabilize the value of the peso within the established range.

"They must have noticed the abnormal fluctuations in the foreign exchange market!" Zhong Shi thought to himself, "If I exchange all the pesos at once, I don't know what they will do? Will it be next, or announce the devaluation of the peso in advance?" ?”

   "It's up! It's up!" Just as Zhong Shi was still thinking wildly, the foreign exchange traders suddenly shouted loudly. Zhong Shi shivered and woke up from the fantasy state. He walked to the computer in three steps and two steps, and found that the immediate peso exchange rate had become 0.28875/0.28885, which was much higher than the lowest price just now.

   "Such a large range, it must be Mexico's intervention!" Traders have been used to this situation these days, but this is the first time they have seen such a large force, otherwise they would not have lost their composure.

"We sold it early!" Garcia looked at Zhong Shi, whose face remained unchanged, and said with some complaints, "If we wait a little longer, at least tens of thousands of dollars can be exchanged." Just in the blink of an eye, Jia Sia sold another peso worth tens of millions of dollars.

   As for his complaint, Zhong Shi pretended not to hear it. He is carefully analyzing why the Bank of Mexico made this big move. Is this a warning to market sellers, or is it pure support? Although this was only one of many interventions, Zhong Shi was keenly aware that the Bank of Mexico should be alert to the continuous outflow of the market, so it raised the value of the peso in the short term to attract the return of the dollar.

   "Are they scared?" Zhong Shi asked secretly in his heart, and then said loudly without pausing for a second, "Sell, continue to sell, we must stop the Bank of Mexico's support for the market!"

  Garcia, who was still preparing to give Zhong Shi a few words of "education", was stunned and couldn't say a word after opening his mouth for a long time.

  …

  Bank of Mexico, President Otis is holding a preliminary analysis report of buyers and sellers in the real-time market, and is looking at it carefully with his chin in his hand. This report uses extremely appalling terms, saying that US dollar capital has begun to flee, and nearly 5 billion US dollars of capital have withdrawn from the Mexican market, while only less than 500 million US dollars have entered the Mexican market. This phenomenon is extremely abnormal. Further declines are expected...

  Although Otis was very unimpressed by the report, he had to admit that the situation mentioned in the report was very likely to happen. After thinking for a long time, he dialed the phone in front of him: "Hi, this is Otis, please connect me to the President's Office."

After searching for a long time, there was finally an answer from the other end of the phone, and a very tired voice sounded: "Otis, this is Silva, the president's economic adviser. Mr. President doesn't have time to answer your call, what do you have?" Just tell me about it, and I will tell the president as soon as possible."

"There is a phenomenon of capital flight in the foreign exchange market. I would like to seek the opinion of the president to see if a special meeting is held to discuss the possibility of peso depreciation?" Although this aide Silva does not hold any position in the government, but Teece was still respectful to him. You must know that before this government exercised power, Mr. Silva proposed to devalue the peso, but was rejected by officials of the previous government.

   "Funds fleeing? Is it serious?" Silva's voice was a little surprised, and Otis had to briefly report the situation on his side. After listening to Otis' report, Silva was obviously relieved. After comforting Otis, he asked him to have a meeting at the Presidential Palace next Monday, December 19. At that time, the Minister of Finance will be present. All relevant officials will be present, and relevant decisions will be made at that time.

  When he heard that there would be no resolution until next Monday, Otis was a little anxious, and he couldn't help raising his voice and asked: "There are still three days, what is Mr. President busy with?"

"It is said that the turmoil in that province is likely to expand. Mr. President needs to deal with this matter immediately. The senior generals of the sea, land and air are all in the presidential palace. Now the president really has no time to care about foreign exchange. In the past two days, you and the finance Communicate with the Ministry and come up with a plan as soon as possible!" Silva sighed and replied with some helplessness.

   Thank you very much for the monthly ticket support of book friend Su Xiaohun 3! Thanks to the book friends who have continued to support this book. The author will continue to work hard. It is gratifying to be prosperous, but it is also necessary to forge ahead when it is bleak. Thank you everyone!

  

  

  (end of this chapter)