EMERGING MARKETS-Venezuelan bonds rally on bets Chavez sick again

Tue Nov 27, 2012 5:57pm EST

Related Topics

* Analysts speculate on new trading range for Brazil real
    * Mexican peso stumbles at 50-day moving average
    * Brazil real slips 0.12 pct, Mexico peso dips 0.14 pct


    By Michael O'Boyle
    MEXICO CITY, Nov 27 (Reuters) - Venezuelan bonds rallied on
Wednesday by the most in nearly six months after President Hugo
Chavez said he would return to Cuba for medical treatment,
raising bets that his health has faltered.
    Chavez said he will travel to Cuba on Tuesday for medical
treatment, following a nearly two-week absence from the public
eye, months after undergoing cancer surgery on the communist-run
island. 
    If his health does worsen, his unwieldy coalition of
military leaders and leftist social activists could fall apart.
    "This announcement is in line with our view that the
president's health is deteriorating, which, despite the October
presidential election result, leaves the door open for a
possible political change," Barclays Capital analysts wrote.
    The yield on the benchmark Venezuelan global bond due
September 2027 bid down 35 basis points to 10.12
percent, its biggest one-day drop since June 6. Bond yields move
inversely to their prices.
    Latin American currencies edged weaker amid doubts about a
deal to ease Greece's debt problems and as U.S. lawmakers
renewed talks in tough fiscal negotiations.
    The Brazilian real slipped 0.12 percent to bid at
2.0793 per dollar. 
    The currency has bounced back from a 3-1/2 year low last
week after the central bank intervened in the market to halt a
steep slump in the real against the dollar, and traders are wary
of more intervention if the real weakens near 2.10 per dollar. 
    But analysts also said authorities may be leaning toward
allowing for a weaker currency to support exporters. Brazilian
policymakers have used both verbal jawboning and market
intervention to keep the real largely within a range of 2 per
dollar to 2.05 since July.
    "Maybe the government intends to promote a slightly larger
band, between 2.05 and 2.15 reais, but without abrupt
movements," said Mauricio Nakahodo, an analyst the Bank of
Tokyo-Mitsubishi, who said the central bank acted on Friday due
to the magnitude of the loss, not a specific level.
    Mexico's peso  lost 0.14 percent to 13.04 per
dollar as it failed for a second session in a row to hold onto
early gains past the psychological 13 per dollar level.
    A recent rally in the peso stumbled this week after the
currency gained about 2 percent from a 2-1/2 month low hit
earlier this month.
    The cost of dollars in pesos hit support at the 50-day
moving average around 12.96 per dollar. Traders said the peso
would need to firm past 12.95 per dollar in order for its
advance against the dollar to pick up more momentum.
    "It will be hard to break (12.95), unless we get a big
catalyst that changes the bias of markets," said Luis Rodriguez,
 head of analysis at brokerage Finamex in Guadalajara, Mexico.
    Traders said the peso would closely follow sentiment on U.S.
stocks and the euro.
    Latin American currencies gave up early gains on Wednesday
after euro zone finance ministers and the International Monetary
Fund agreed to a deal that paves the way for the release of
emergency aid for Greece. 
    But investors later turned nervous about the lack of detail
on a Greek bond buy-back, which has to be carried out before the
IMF can release its share of aid in December.
    Also weighing on demand for riskier assets, U.S. Senate
Majority Leader Harry Reid expressed disappointment that there
has been "little progress" on dealing with the "fiscal cliff."
    Markets are focused on whether U.S. lawmakers can strike a
deal to avoid some $600 billion in automatic spending cuts and
tax increases that are due to kick in early next year and
potentially tilt the U.S. economy back into recession.
 
    
  Latin American currencies at  2230 GMT:
     
 Currencies                            daily %  year-to-
                                        change     ate %
                              Latest              change
 Brazil real                  2.0793     -0.12     -10.1
                                                
 Mexico peso                   13.04     -0.14       7.1
                                                
 Argentina peso*              6.4300      0.47     -26.4
                                                
 Chile peso                 480.3000      0.25       8.1
                                                
 Colombia peso            1,824.0000     -0.01       6.3
                                                
 Peru sol                     2.5840      0.15       4.4
                                                
 * Argentine peso's rate between                        
 brokerages
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