EMERGING MARKETS-Mexican peso gains on Fed stimulus expectations

Fri Sep 7, 2012 6:45pm EDT

* Weaker-than-expected U.S jobs data raises QE3 hopes
    * Mexico central bank leaves rates unchanged
    * Mexican peso gains 0.7 pct, Chilean peso up 0.04 pct


    By Gabriel Stargardter
    MEXICO CITY Sept 7 (Reuters) - The Mexican peso rose on
Friday as below-forecast jobs data from the United States drove
investors toward emerging markets and further raised the
prospect of the Federal Reserve pumping additional money into
the sluggish American economy.
    A public holiday in Brazil shuttered the week's trading in
the real  a day early. 
    The Mexican peso rose 0.72 percent to 12.9760 per
U.S. dollar after trading as low as 12.9413. 
    U.S government data on Friday showed non-farm payrolls rose
by a weaker-than-expected 96,000 jobs in August, setting the
stage for a third round of quantitative easing, or QE, when Fed
policy-makers meet next week. 
    In the Fed's two previous rounds of easing, it pumped about
$2.3 trillion into the economy to buy bonds with the aim of
lowering long-term interest rates. That encouraged more
investors to look for higher interest rate returns elsewhere,
including in emerging markets such as Mexico.
    "The market now expects that the chances of the Fed coming
out and throwing money at the economy, of printing more money,
has improved, so the price of the dollar has fallen leading
other currencies to appreciate," said Ezequiel Aguirre, a Latin
American strategist at Bank of America-Merrill Lynch in New
York. 
    With the annual rate of inflation in Mexico reaching a more
than two-year peak of 4.57 percent in August on the back of
rising food prices, the central bank on Friday left interest
rates unchanged at 4.5 percent. In contrast, regional peers
Colombia and Brazil have slashed rates to record lows to
stimulate growth..
    The Mexican central bank aims for annual inflation of 3
percent, plus or minus 1 percentage point. 
    "With inflation well above target and core steadily going
up, I think there'll be resistance from some members of the
board to consider a cut at this point," said Rafael de la
Fuente, an economist at UBS.
    "And a hike (in interest rates) I don't think is warranted
given that most of the price pressures are supply shock driven."
    The Chilean peso jumped 0.04 percent to 475.70 per
dollar, despite news that Chile's yawning trade deficit
 has grown to its largest levels - $843 million -
since October 2008. 
    
    Latin American FX prices at 2220 GMT:
 
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real               Holiday                  
                                             
 Mexico peso               12.9760     0.72     7.66
                                             
 Argentina peso*            6.3100     0.48   -25.04
                                             
 Chile peso               475.7000     0.04     9.17
                                             
 Colombia peso          1,800.8000    -0.03     7.64
                                             
 Peru sol                   2.6080     0.00     3.41
                                             
 * Argentine peso's rate between                    
 brokerages
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