EMERGING MARKETS-Latam currencies weaken on Greece anxiety

Mon Nov 26, 2012 12:07pm EST

Related Topics

* Investors cautiously await outcome of Greek aid talks
    * Brazil real's losses curbed by intervention concerns
    * Mexican peso down 0.2 pct, Brazilian real 0.15 pct lower

    By Natalia Cacioli and Michael O'Boyle
    SAO PAULO/MEXICO CITY, Nov 26 (Reuters) - Latin American
currencies edged lower on Monday as investors cautiously awaited
the outcome of Greek aid negotiations, the success of which the
market saw as essential to avoiding an escalation of the euro
zone debt crisis.
    Losses in the Brazilian real  were contained,
however, by expectations that the central bank could again
intervene in the market if the currency weakens toward the level
of 2.1 per dollar.
    The Chilean peso lost 0.6 percent while the Mexican
peso  fell 0.2 percent on the Greek uncertainty.
Investor focus was on Brussels, where euro zone finance
ministers and the International Monetary Fund tried for the
third time in as many weeks to agree on emergency aid for
Greece. 
    Mexico's peso has firmed more than 2 percent from a 2-1/2
month low hit earlier this month, supported by easing concerns
about fiscal negotiations in the U.S. Congress and appetite for
the country's higher-yielding debt.
    Data on Monday showed Mexican manufactured exports rebounded
in October after a recent slump, underscoring solid demand in
the United States, Mexico's top trading partner. 
    The central bank said on Friday that total portfolio
investment in Mexico by foreigners reached $24 billion in the
third quarter, boosted by a record flow of foreign investment
into peso-denominated debt. 
    "Holdings (of peso debt by foreigners) will keep rising, and
as a consequence, the peso will keep gaining," Gabriela Siller,
an economist at Mexican brokerage BASE wrote in a note.
    
    REAL'S NEW TRADING BAND?
    The Brazilian real weakened 0.15 percent to 2.0843 per
dollar as investors digested conflicting signs from policymakers
about the future of the country's foreign exchange policy.
    The real on Friday posted its largest single-day gain in
nearly three months after the central bank stepped into the
market to halt losses that were partly fueled by comments from
Finance Minister Guido Mantega.
    Speaking to business leaders in Sao Paulo, Mantega said
Brazil's exchange rate was at a "reasonable though not totally
satisfactory level" to support industry. His remarks drove the
real as low as 2.1168 per dollar, its weakest level in 3-1/2
years.
    The apparent tug of war between the central bank and Mantega
left investors wondering whether policymakers still uphold an
informal trading band of 2.0-2.1 per dollar, where the real has
been stuck since early July.
    "I believe the market is still digesting that intervention,"
said Luiz Fernando Genova, a trader with Banco Daycoval in Sao
Paulo. "We have seen the real weakening lately, but it's still
too early to say they will change this band."     
    
    Latin America FX prices at 2045 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.0843    -0.15   -10.35
                                             
 Mexico peso               13.0035    -0.18     7.43
                                             
 Argentina peso*            6.4400    -0.47   -26.55
                                             
 Chile peso               481.5000    -0.60     7.85
                                             
 Colombia peso          1,825.0000    -0.07     6.21
                                             
 Peru sol                   2.5880     0.00     4.21
                                             
 * Argentine peso's rate between                    
 brokerages
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