AMLO of Mexico revolves around central bank work | Andres Manuel Lopez Obrador News

In a startling move that shook markets, Mexican President Andres Manuel Lopez Obrador proposed to Deputy Finance Minister Victoria Rodriguez to replace the initial candidate for governor of the central bank, Arturo Herrera.

The Mexican president appointed a woman to head the central bank for the first time after the previous candidate was accidentally dismissed, a move that shook markets, lowered the peso currency and sparked uncertainty over monetary policy.

Taking government officials by surprise on Wednesday, President Andres Manuel Lopez Obrador proposed to Deputy Finance Minister Victoria Rodriguez that former Finance Minister Arturo Herrera be replaced as the initial candidate for governor of the central bank.

The shock that Mexico is struggling with the biggest 20-year inflation has confused investors, and has led to the sale of Mexican assets, analysts said. At one point, the peso’s currency fell more than 2 percent against the dollar, though it later recovered some losses.

The cost of securing exposure to Mexico’s sovereign debt rose from its highest level in March as five-year credit separation swings rose five basis points to 112 bps, according to IHS Markit data. U.S. Treasury expansions also reached 365 bps, the highest since early October.

Rodriguez, who has risen in successive governments in Mexico City since he became mayor of Lopez Obrador, kept a low profile in the finance ministry, and some analysts expressed concern that he would not be independent enough.

“I think that’s why the peso is falling out of bed. People are worried that for him (Lopez Obrador) it is a roundabout way to interfere with the central bank, ”said Omotunde Lawal, a rising corporate market debt in Barings.

Lopez Obrador did not specifically state what changed his opinion. Rodriguez has said he will act independently, and that his government respects the autonomy of the bank.

Asked if Herrera had done something wrong, Lopez Obrador said no, pledging to include women, and that Rodriguez was the best option “given the situation.”

Lopez Obrador, who clashed with the central bank in the past over the use of surpluses generated by exchange fluctuations, also dismissed the suggestion that his change of opinion could weaken Mexican money.

“The government, the Ministry of Finance, has not intervened in the decisions of the Bank of Mexico, not once,” he said. “And neither will we.”

However, the peso was significantly worse than other major Latin American currencies on Wednesday.

Rodriguez is set to replace Prime Minister Alejandro Diaz de Leon, and his term will end at the end of 2021. His appointment must be ratified by the Mexican Senate, which should be a formality due to the comfortable majority of the government.

Lopez Obrador chose Herrera to head the bank in June, and although rumors began to circulate that his name could be removed, officials unexpectedly took the news on Tuesday when a senior lawmaker announced a plan change.

Rodriguez is ready to join the bank at a difficult time, and the data show that inflation accelerated faster than expected in early November, to 7.05 percent, the highest level since April 2001.