(Bloomberg) -- Mexico could intervene to restore order if currency market volatility ever becomes “extreme,” central bank Governor Victoria Rodriguez said. 

Rodriguez made her remarks Wednesday during a month in which the peso has led global losses, though she stopped short of issuing a pledge to step in.

The Banxico chief said that possible intervention mechanisms include a $30 billion foreign exchange coverage program that could be deployed by the exchange commission, which is directed by a group of senior finance officials including herself. But she reiterated that currency flexibility remains one of the pillars of Mexico’s economic system, and said the bank would not target any particular exchange rate. 

“The Bank of Mexico will be very attentive to developments in our markets and to the possibility that they show atypical behavior or extreme volatility,” Rodriguez said, in a presentation of the bank’s regular financial stability report. “In the event of any eventuality that warrants it, it could take the necessary measures to reestablish orderly behavior.” 

Any such intervention could be taken by the bank on its own, or in coordination with other entities such as the exchange commission, she said. 

Peso Volatility

Rodriguez said the bank should evaluate “with caution” the inflationary impact of peso volatility ahead of the next monetary policy decision on June 27. Policymakers need time to evaluate these effects, which may not be evident in the short term, Rodriguez added. 

Factors that contributed to the recent peso moves include war in the Middle East, the delay in the Federal Reserve’s reduction in rates, and “idiosyncratic factors,” Rodriguez said without explicitly mentioning Mexico’s recent election.

The remarks had little immediate impact on the peso, which has shed more than 10% since the June election. The ruling Morena party and its allies won more seats in congress than expected, fueling concerns that lawmakers could pass a bill to replace the Supreme Court with elected justices, thereby weakening checks on the ruling party’s power.

--With assistance from Michael O'Boyle.

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