Foreign reserves peaked at a record $113.6 billion in Mexico in 2010,rising $22.6 billion toward the end of the year. This end of the year influx was primarily due to increases from oil exports and the Central Bank's dollar purchases when the peso appreciated. In the last quarter of the year,Mexico's foreign reserves saw the biggest increases all year.
According to the Wall Street Journal,there were higher than expected oil prices throughout 2010 that boosted the figure. Banco de Mexico changed dollars for Petroleos Mexicanos,the state oil monopoly,so their trade-ins were significantly higher this year due to their increased revenue from oil exports.
In addition to the increase in oil prices,the Central Bank also purchased $4.6 billion from commercial banks. They made the purchases through a system of put options that were created to bolster reserves when the peso appreciates vs. the dollar – just as it did throughout 2010. The peso appreciated a total percentage of 5.8% during the last year.
Banco de Mexico sells $600 million in options each month. These options can be used on days when the peso rises above it's 20 day average. In January 2011,Mexican banks have already exercised $592 million of the $600 million – which indicates that the peso is continuing to appreciate against the dollar even as new year begins. For example,the peso was recently quoted at 12.2535 pesos to the dollar versus 12.3650 pesos at the end of 2010. This notable increase in just a few days is a good sign for the rest of 2011.
This news comes just after Mexico's decision to request an extension of their flexible credit line with the International Monetary Fund. Initially it was seen as a sign that dollar options would be lower in 2001,but this hasn't turned out to be the case.