EMERGING MARKETS-LatAm currencies mixed before Bernanke speech

Thu Aug 25, 2011 4:35pm EDT

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* Investors await news from Bernanke's speech Friday * Mexico's peso reverses gains; Brazil real little changed (Updates prices)

By Jeb Blount and Michael O'Boyle

RIO DE JANEIRO/MEXICO CITY Aug 25 (Reuters) - Latin American currencies traded mixed in seesaw movements against the U.S. dollar on Thursday, the day before a planned address by the head of the U.S. central bank.

Ben Bernanke, chairman of the U.S. Federal Reserve, is scheduled to speak on Friday at the Jackson Hole Economic Symposium, an annual gathering of world economists and central bankers in a Rocky Mountain resort town.

Investors have been divided between those betting Bernanke will announce new measures to jump-start the U.S. economy and those who think he won't, causing wide swings in the region's currencies in recent days.

Those betting on new measures expect Bernanke to announce or signal expansion of the Fed's "quantitative easing" program -- a stimulus program in which the Fed bought outstanding U.S. government debt.

That plan ended in June after flooding the economy with $600 billion of cash. Bernanke outlined that program at last year's Jackson Hole gathering.

That cash has helped Latin American currencies gain this year as global investors borrow at near-zero rates in the U.S. to invest at higher yields in Latin America. [ID:nN1E77N0DL]

"All eyes are on Jackson Hole. Tomorrow is the day, and everybody is hoping Bernanke will come up with some kind of miracle to pull the U.S. economy out of its doldrums," said Jankiel Santos, chief economist with BES Investimentos, the Sao Paulo unit of Portugal's Banco Espirito Santo.

"Sadly there's not much chance of that."

EXTREME VOLATILITY

Brazil's real BRBY closed the day little changed from Wednesday, paring early losses to edge 0.02 percent stronger to 1.6095 to the dollar. Earlier it had weakened as much as 0.48 percent.

Brazilian 10-year, local-currency NTN bonds BR10YT=RR rose 1.97 to 913.62 or 91.36 percent of face value. The yield fell 3 basis points to 11.93 percent.

The real traded in a seesaw fashion much like world stock markets, said Rafael Dornaus, a market analyst with Hencorp Commcor, a Sao Paulo brokerage.

"The volatility is terrible, and the markets are blowing up or falling down even on tiny news," he said. "There is really nothing orienting the market in any consistent way today."

Mexico's peso MXN=D2 gave up early gains to weaken in late afternoon trading, shedding 0.18 percent to 12.5078 to the dollar. It had gained as much as 0.93 percent.

"If you're looking for clear reasons for why things are moving today, things that are fundamental and different, things that have happened in the last 72 hours, I really can't give you much," said Alberto Ramos, chief economist with Goldman Sachs in New York.

Mexico's 10-year "bono" MX10YT=RR fell 0.32 to 103.70 percent of face value. The yield rose 5 basis points to 6.16 percent. The yield on a comparable U.S. Treasury is 2.23 percent US10YT=RR

The peso's declines may soon spark a rebound in Mexican bond prices, said Deborah Ausina, a trader at Bulltick Capital Markets in Miami.

Investors interested in Mexican bonds have been looking to buy when the peso weakens to about 12.50 to the dollar, she said. Late Thursday, the peso crossed through that threshold to trade at its weakest levels since Aug. 8.

If the market is disappointed with Bernanke's speech on Friday, she added, the peso could slump back toward the one-year low of 12.7633 per dollar that it reached on Aug. 9, she said.

Colombia's peso COP2=STFX weakened 0.27 percent to 1,790.90 to the dollar.

Chile's peso was little changed from Wednesday at 466.80, Peru's sol was little changed at 2.7300 and Argentina's official peso ARS=RASL was little changed at 4.1825.

Argentina's unofficial, or "parallel" market peso, extended losses toward an all-time low, weakening 0.74 percent to 4.4175. (Reporting by Jeb Blount in Rio de Janeiro and Michael O'Boyle in Mexico City; Additional reporting by Jean Luis Arce in Mexico City; Editing by Jan Paschal and Padraic Cassidy)

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