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Mexico raises rates and cuts spending to support peso

The Mexican government says it is dropping daily dollar auctions, raising interest rates and cutting government spending by 0.7 percent of GDP to counter the falling peso and oil revenues.

The Treasury Department says it will cut federal spending by the equivalent of about $7.2 billion dollars, and the Bank of Mexico said it would raise interbank interest rates from 3.25 percent to 3.75 percent.

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The peso’s interbank rate rose to 18.29 to $1 on Wednesday, after falling as low as 19.40 to $1 earlier this month.

The central bank had been auctioning off as much as $400 million per day to support the peso.

Prices for Mexican oil exports averaged $24.56 per barrel Wednesday. The government depends on oil revenue for about a third of its budget.