Mexico's Cordero: likely to increase FX reserves

Fri Jan 29, 2010 11:03am EST
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DAVOS, Switzerland (Reuters) - Mexico is highly likely to push ahead with plans to buy more U.S. dollars to increase the country's international reserves, Finance Minister Ernesto Cordero said on Friday.

In an interview with Reuters, Cordero said the finance ministry was inclined to back a proposal from Mexico's central bank to increase currency buffers.

"That's an idea we are exploring, we are considering different scenarios about that," he said on the sidelines of the annual meeting of the World Economic Forum.

"There's a high probability that we decide to increase international reserves and gradually phase out from the flexible credit line from the IMF (International Monetary Fund)."

Cordero also said he was planning to accept an offer to sit in as an observer on central bank rate meetings.

Central bank chief Augustin Carstens proposed the reserves plan on Wednesday, saying improved market conditions made it a good time to accumulate reserves.

Mexico holds $91.2 billion in reserves, near a record high. While it was most focused on dollar purchases, Cordero did not rule out buying other currencies such as the euro.

"Basically it is to buy dollars in the market," he said. "Mostly we are concerned about dollars, certainly we are open to consider different alternatives."

Cordero also said he was concerned that a sudden inflow of capital could put upwards pressure on the peso.   Continued...