Banxico, as of today, sells 200mn USDMXN at a minimum price of +1.0% above the previous-day FIX and an additional 200m at +1.5%. The Central Bank is likely to fine-tune its FX interventions, will likely make operational changes, but will not alter the intervention amount at this stage. The announcement is expected to come before January 29.

Current market conditions do not warrant an active approach, with little discretion with respect to interventions. But should volatility continue to climb and MXN decouples from EM price action, the central bank may adopt a more active approach, raising the risk of an increase in the amount of intervention. We should however note here that Mexico's international reserves have fallen substantially. Also, the expected inflows from oil have decreased as energy prices and production reach multi-year lows.

"We believe that the Central Bank would like to have more flexibility in terms of the timing of interventions, although we do not think that current market conditions warrant an active approach (discretionary interventions), as our intervention index suggests (Figure 1). In the new setting, eliminating the schedule, Banxico would have time discretion to implement both auctions if the USDMXN price reaches the minimum levels of +1.0 and +1.5% respectively. The total amount would be unchanged at 200mn USDMXN each auction for a total of 400mn," notes Barclays in a report