Chapter 211 Official devaluation of the peso

  In the United States, as the foreign exchange market just opened on this day, there was a huge peso sell order, amounting to as much as 500 million U.S. dollars, forcing the Bank of Mexico to intervene in the market. This phenomenon immediately aroused the strong attention of the foreign exchange trading departments of various commercial banks. They all realized that there was a leader in the market who was undisguisedly suppressing the Mexican peso, and the daily exchange amount was hundreds of millions of dollars. Naturally, they would not believe that this large-scale selling institution could destroy the Bank of Mexico, but for several consecutive days of transactions, this institution only sold and did not buy in the market, which gradually made them realize that something was wrong.

   Among them, the more careful traders have counted the relevant amounts since the first day of Zhongshi's large-scale sell-off. This statistic does not matter, they found that so far, this institution has sold more than US$5 billion worth of pesos through different channels, and at the same time, the amount of pesos bought is far from reaching this amount, that is to say, The institution was openly shorting the peso.

  Reminiscent of the sharp increase in peso short positions in the IMM market, these savvy traders quickly understood that this was a short sale against the peso. This discovery made them very surprised and extremely excited. The smoke of the currency crisis that swept across Europe two years ago has not yet cleared, and now there are signs that a new currency crisis is about to break out in South America. Foreign exchange traders who have a currency crisis suddenly feel that the opportunity to gamble has come.

   It is also a natural defect of fixed exchange rates, which makes these traders dare to short short without any scruples, because the ratio between the cost to be paid and the benefit to be obtained is too great.

However, since there are short sellers, there are also long sellers. There are many people in the market who don't think so about Zhongshi's behavior of selling pesos. They buy when the market peso exchange rate drops to a low point, and then take advantage of the Bank of Mexico Sell ​​it when you intervene to earn the relevant exchange rate difference.

  What they don't know is that the Bank of Mexico, which they regard as a solid backing, is already discussing the devaluation of the peso. If these people who make profits by using small exchange rate differences fall into it at this point in time, they may have to spit out all their profits, and even lose a huge sum of money.

  From this point of view, these people are undoubtedly dancing on the tip of a knife, and if they are not careful, they will be smashed to pieces.

   "Mr. Zhong, we only have the last 2 billion U.S. dollars left!" When Garcia recovered from the tense operation, his face was full of fatigue from the night.

After Zhong Shi snorted noncommittally, he noticed that all the traders looked sluggish, and he couldn't help but said with some guilt: "Everyone should take a good rest these two days, and come back after this weekend to exchange all funds."

   A group of people shouted happily as if they had received an amnesty, completely ignoring that Zhong Shi, the nominal employer, was still at the scene.

   Only Garcia was a little worried, quietly pulled Zhong Shi aside, and said in a low voice: "Mr. Zhong, there are still 2 billion US dollars. If you can't exchange them in time, I'm afraid the night will be full of dreams."

  At this time, Garcia had already understood Zhong Shi’s idea, which was to firmly short the peso. He was terrified but also a little proud. As an ordinary foreign exchange trader of a commercial bank, he was able to join the campaign of shorting a country's foreign exchange system, which made him both surprised and excited.

   I have to say that in the bones of Wall Street traders, there is a mentality of fearing that the world will not be chaotic. What these people are most afraid of is the flatness of the market, because flatness means no risk, and no risk means no return.

  Chase Bank, Garcia has sent the news, but I don't know if they have followed up in the market. However, Garcia has clearly noticed that the power of short selling in the market has increased significantly recently, but he doesn't know if it is someone from Chase Bank.

   "Don't worry! Put this part of the funds first, and it won't be too late to operate until Monday!" Zhong Shi thought for a while, and then flatly rejected Garcia's offer. His considerations are, first, it is difficult to find opponents in the market with such a large amount of funds, even if these traders are allowed to stay up late to work, it may be futile; second, according to the historical process, the devaluation of the Mexican peso should be On Monday night, that is, late at night on the 19th, there will still be a full day for him to operate.

   Regarding the sudden depreciation of the Mexican peso in the last generation, Zhong Shi is not clear about the specific reasons, but there are several reasons, namely, the decline in domestic product, the large current account deficit, and the accelerated flight of foreign capital, etc. The situation, which was not bad at first, quickly deteriorated because of the devaluation announced late at night. As a result, in less than two days, the Mexican government's foreign exchange was exhausted, and the peso had to be announced to float freely.

   For this life, whether the Mexican government will announce in advance, Zhong Shi is not clear. In fact, even if it is announced now, Zhong Shi can make a lot of money, so he is not worried at all.

  Seeing that Zhong Shi was so persistent, Garcia couldn’t say anything more. After bidding farewell to Zhong Shi, he hurriedly left the trading room. The work of the past few days made him terribly exhausted, and he wanted to take a good rest.

  …

  History moves forward according to the tenacious inertia. On Monday (19th), the Mexican government did not express its position on the fluctuations in the foreign exchange market. This made Zhong Shi heave a sigh of relief. It seems that the advantage of his own rebirth still exists. By the time the market opened, he had traders desperate to polish whatever pesos they had on hand.

At the same time, at the official residence of the President of Mexico, the President finally had time to receive officials and experts from the Bank of Mexico and the Ministry of Finance, but Mr. President only showed up for five minutes, shook hands with a group of people symbolically, and then reported all The job was lost to his economic staff.

The turmoil in Chiapas has intensified, and the regular army has begun to be unable to contain the turmoil. Although the president has issued a mobilization order requiring the army to limit the scale of the turmoil to a controllable range at all costs, even if this kind of thing Even the president can't fully control it. Although the news of the turmoil was strictly blocked, the stock market had already reacted. On this day, the Mexican stock market opened at a low number of 2327, and it went all the way down without any upward momentum.

Regarding this sudden depreciation, the president's economic aides were naturally very resistant at first, but when they heard that the foreign exchange reserves had lost 5 billion US dollars in the past few days, from 25 billion US dollars to a little over 20 billion US dollars Sometimes, I was so shocked that I couldn't say anything to refute. In particular, the foreign exchange losses in the past two days, on the 16th alone, saw a net reduction of 2 billion US dollars, setting a new high in foreign exchange losses.

   "Gentlemen, the news just came that there was another huge exchange in the foreign exchange market, with an amount as high as 2 billion U.S. dollars." Otis walked in from the meeting room and announced to the people in the room with a blank expression.

   Just when there was silence just now, a staff member from the Bank of Mexico came in and asked Otis to answer a call from the Bank of Mexico. Five minutes later, Otis announced the news to everyone.

When these people were still immersed in the shocking fact of exchanging 2 billion U.S. dollars on the 16th, there was another attack on the market to exchange 2 billion U.S. dollars. You must know that this was still in the morning. If you follow this intensity, there may be a stronger attack in the afternoon Appear.

  A month ago, the daily trading volume in the Mexican foreign exchange market was only about 1 billion US dollars.

   Time, there is not much left for them!

   After a long period of silence, the president's economic staff team can only accept the proposal of a 15% depreciation. They will submit their opinions and suggestions to the president at a later time, and let the president make the final decision. But they all know that this is just a formality process, and in the end the president will sign the relevant documents.

For the future impact, these people discussed for a long time, and finally decided to close the stock exchange on the 20th to give the market a buffer time. reach the equilibrium price considered by the market.

   Late at night on December 19, 1994, the Mexican government announced that the peso would depreciate by 15%, while retaining a floating range of 4%.

  As soon as the news came out, the entire market was shocked!

Although the market generally believes that the value of the Mexican peso is too high to maintain the exchange rate of 3.46 pesos to the US dollar, few people think about the peso given the thriving Mexican stock market and the fact that the Bank of Mexico has more than US$20 billion in foreign exchange reserves. Will actively depreciate at this time. The general view of market observers is that the Mexican government will gradually liberalize the depreciation rate of the peso and gradually let the peso depreciate to an equilibrium price.

   Not only those market observers, even the hedge funds of macro strategies have not thought of this matter. Hedge funds who are good at finding market loopholes judge that the value of the peso is too high, but because the Mexican domestic market has a large amount of US dollar capital, and these funds exist in the form of short-term bonds, there are not many institutions among them shorting the Mexican peso , It also lost an opportunity to build a position in advance.

   But it’s never too late to short the peso!

   Hedge funds in the Central Park stronghold reacted first to the depreciation of the peso, borrowing pesos in the market and then selling them. But at this time, the main foreign exchange markets where the peso flows have been closed, and all they can borrow is a small amount of pesos.

   At this time, Zhong Shi was lying leisurely on a comfortable sofa chair, watching the breaking news on CNBC, feeling extremely comfortable in his heart.

  The course of history runs according to the strong inertia after all, and Zhongshi’s short selling did not change anything, except for his participation. The current depreciation is just a signal, and the subsequent panic flight of capital is the real culprit that caused the peso to plummet!

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  (end of this chapter)