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* Chile hits 7-week low on Japan nuclear crisis
* JPMorgan cuts exposure to emerging FX by 10 pct
* Brazil government delays intervention measures
* Mexican peso sheds 1.4 pct, Brazil real 0.42 pct
By Michael O'Boyle and Walter Brandimarte
MEXICO CITY/NEW YORK, March 16 Brazil and Mexico's currencies hit three-week lows on Wednesday while Chile's peso fell to its weakest since January as concerns about Japan's nuclear crisis drove investors into safer-haven assets.
Mexico's peso, the most-liquid and easily settled currency in the region, slumped the most in one day since last May.
Adding pressure to Latin American foreign exchange markets was a JPMorgan report recommending investors to cut exposure to emerging market currencies by 10 percent. [ID:nN16187257]
Selling of Latin American currencies accelerated as global officials sounded increasingly concerned over the situation at the quake-stricken nuclear plant in Fukushima. [ID:nL3E7EF450] "This is panic and everything will depend on the developments out of Japan," said Alonso Madero, a fund manager at financial group Actinver in Mexico City. "Markets are overreacting and I think this will be transitory," he added.
The Mexican peso MXN= shed 1.84 percent to 12.21 per U.S. dollar.
Fears that the global economic recovery may be choked off have been increasing due to Japan's disaster and growing violence in oil-producing countries.
On Monday, Mexico's peso notched a nearly 2-1/2 year high, backed by an improving outlook for the U.S. economy. But some banks, like JPMorgan, have begun to revise down their U.S. growth forecasts. If the U.S. outlook worsens, the peso could lose support.
"Foreign investors were getting out of Mexico today," Rebeca Lizarraga, an analyst at Scotia Capital. "Risk aversion is getting really strong, because we were not seeing this before."
The Chilean peso CLP=CL fell 0.51 percent to 486 per dollar. The peso has shed 3.7 percent from a high in late February amid concerns that unrest in the Middle East and North Africa will push oil prices higher. Chile imports almost all of its oil, unlike exporter Mexico and self-sufficient Brazil.
Expectations that Chilean policymakers will keep raising interest rates could help the currency snap back if global jitters calm down.
The central bank is expected to raise its benchmark rate by 25 basis points to 3.75 percent on Thursday.
Chile's central bank said on Wednesday its short-term inflation outlook has deteriorated because of global turmoil in the past month, which may back some market player bets on a 50 basis point hike this week.
The Brazilian real BRBYBRL= bid 0.42 percent weaker at 1.672 per dollar.
Losses in the Brazilian real were cushioned, however, after a Finance Ministry source said the government would delay measures to curb the currency's recent appreciation trend while Japan's crisis unfolds. For details, see [ID:nN15275186].
A Finance Ministry source told Reuters late on Tuesday that the government discarded for now the announcement of new measures to tame the currency appreciation because of global economic uncertainties stemming from Japan's crisis.
The new measures were expected to be unveiled as early as this week, after the real spiked to 2-1/2-year highs earlier this month. The real has shed 1.7 percent from that level, amid fears of intervention and the crisis in Japan. (Additional reporting by Jose de Castro in Sao Paulo; Editing by Dan Grebler)