EMERGING MARKETS-Latam currencies slide on Spain bailout fears

Mon Jul 23, 2012 12:03pm EDT

* Half a dozen Spanish regions seen requesting financial aid
    * JP Morgan recommends selling Chilean peso
    * Mexico peso down 1.3 percent, Brazil real falls 0.9
percent

    By Walter Brandimarte and Natalia Cacioli
    RIO DE JANEIRO, July 23 (Reuters) - Latin American
currencies fell on Monday as growing fears that Spain could lose
access to credit markets drove investors into the perceived
safety of the U.S. dollar.
    Mexico's peso, the most traded Latin American
currency, slumped 1.3 percent while the Brazilian real 
 lost 0.9 percent on fears Spain would need to be rescued
by its euro zone partners, further stretching the region's
finances.
    The Chilean peso lost 0.8 percent on a fall in the 
price of copper, the country's main export, and following JP
Morgan's recommendation to sell the currency.
    "Clearly external markets are weighing on the real. The
perception of risk has worsened, with Spain returning to
investors' focus," said Flavio Serrano, a senior economist with
BES Investimento in Sao Paulo.
    Worries that Madrid would be forced into an EU bailout grew
after reports that the Spanish region of Murcia was on track to
become the second in the country to seek financial assistance
from the central government. Half a dozen regional governments
in the country were ready to do the same, according to Spanish
media. 
    Yields paid on Spain's 10-year bonds soared to
more than 7.5 percent, raising questions about the country's
ability to refinance its debt obligations in capital markets.
    As investors' aversion to risk grew, the Mexican peso
weakened to 13.5346 per U.S. dollar, its weakest in three weeks
and sharply above its 100-day and 200-day simple moving
averages.  
    The Brazilian real weakened to as much as 2.0448 per dollar,
a level not seen since July 12.
    The Chilean peso fell to 493.00 per dollar in its second
consecutive session of losses, after closing at a more than
two-month high of 485.40 on Thursday.
    Its recent gains led JP Morgan to recommend investors to
sell the currency, targeting a price of 500 per dollar.
    "The outperformance of the Chilean economy seems largely
priced in the peso," JP Morgan analyst Carlos Carranza wrote in
a note to clients. He said the bank has recently cut its
forecast for copper prices, which should limit the upside for
the Chilean peso. 

    Latin American FX prices at 1540 GMT:
    
 Currencies                            daily %     YTD %
                                        change    change
                              Latest            
 Brazil real                  2.0414     -0.91     -8.47
                                                
 Mexico peso                 13.5346     -1.25      3.21
                                                
 Argentina peso*              6.3900      0.94    -25.98
                                                
 Chile peso                 493.0000     -0.81      5.33
                                                
 Colombia peso            1,791.2000     -0.60      8.22
                                                
 Peru sol                     2.6390      0.00      2.20
                                                
 * Argentine peso's rate between                        
 brokerages
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