EMERGING MARKETS-Mexico peso surges on stimulus hopes, real flat
* Euro zone policymakers seen acting to support Spain, Italy
* Fed also expected to deploy additional stimulus
* Mexico peso jumps 1.35 pct, Brazil real dips 0.04 pct
By Michael O'Boyle
MEXICO CITY, July 27 (Reuters) - Mexico's peso surged on Friday and Chile's currency also gained on hopes for additional economic stimulus on both sides of the Atlantic could result in strong foreign-currency flows into emerging markets.
The Mexican peso led gains in the region, rallying 1.35 percent to 13.2230 per dollar after Bloomberg reported that European Central Bank President Mario Draghi would meet with the president of Germany's Bundesbank to discuss measures, including bond purchases, to help the euro zone.
"Draghi got the market built up for something big and all risk assets are up," said Win Thin, an emerging markets analyst at Brown Brothers Harriman in New York.
It was the second day in a row that comments from Draghi boosted the market. On Thursday, he said that the EBC will do whatever it takes within its mandate to preserve the euro.
But analysts cautioned it may be difficult to overcome the Bundesbank's reservations and resume its Securities Markets Programme (SMP), which it last deployed to buy government bonds in the open market nearly five months ago.
Adding to optimism, weak U.S. economic data is strengthening expectations that the U.S. Federal Reserve would deploy additional stimulus measures. Data showed the U.S. economy slowed in the second quarter as consumers spent at their slowest pace in a year.
Monetary stimulus in the United States and Europe tends to depress the yield investors can get on fixed-income assets in those countries, driving increased flows into emerging markets, where interest rates are higher.
The Chilean peso rose 0.46 percent to 483.50 per dollar, its strongest level in nearly three months, also benefiting from jump in the price of copper, the country's main export product.
"The peso pierced the level of 485.00 per dollar, which now became a floor for the currency in the short term," said Sergio Tricio, head of research at Forex Chile.
The Brazilian real traded nearly flat, slipped 0.04 percent to bid at 2.0228 per dollar as investors feared the central bank could intervene in the market if the currency strengthens too much.
The real has been stuck in a narrow range between 2.0 and 2.05 reais in the past several weeks, in what traders call an informal trading band imposed by the central bank.
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