EMERGING MARKETS-Argentine debt rallies; Brazil real slumps

Thu Nov 29, 2012 5:09pm EST

* Optimism on U.S. budget deal aids most Latam currencies
    * Dollar-long players seek weaker month-end Brazil real rate
    * Real weakens 0.33 pct, Mexican peso gains 0.24 pct


    By Jorge Otaola
    BUENOS AIRES, Nov 29 (Reuters) - Argentine bonds rallied on
Thursday after the country won a reprieve from a U.S. appeals
court that eased investors' fears of a new default as early as
next month.
    Argentine debt prices had tumbled since a U.S. court ruled
last week that the country must pay $1.33 billion by Dec. 15 to
"holdout" investors who rejected a previous restructuring of its
defaulted debt.
    The South American nation had rejected paying the investors,
who had filed the lawsuit, raising the risk of a technical
default on about $24 billion worth of debt since Argentina was
going to be barred from trying to only pay investors who had
taken part in two debt exchanges in 2005 and 2010.
    But an appeals court on Wednesday gave Argentina more time
to fight last week's ruling by U.S. District Judge Thomas
Griesa.  
    "For a few days at least, happiness is back," said Sabrina
Corujo and analyst at consultancy Portfolio Personal. 
    After slumping nearly 30 percent since late October, the
price on Argentina's June 2017 global bond jumped
almost 14 percent on Thursday.
    In currency trading, the Brazilian real extended its losses
for a second day on Thursday, under pressure by dollar-heavy
investors who wanted to weaken the currency as the central bank
on Friday set a monthly exchange reference rate.
    The real  bid down 0.33 percent to 2.0963 per
dollar, recovering from a drop of around 1 percent.
    "The only thing that justifies this currency move is the
fight over the Ptax," said Mario Battistel, manager of the
currency trading desk at Fair brokerage in Sao Paulo. 
    The Ptax is a benchmark exchange rate for a broad range of
contracts, including foreign loans, trade, and derivatives.    
Dollar-laden speculators may have tried to keep the real weak
through the Ptax fix, traders said. A higher Ptax means it costs
more reais to buy dollars.
    The real pared steeper losses as investors feared that
Brazil's central bank could intervene again if the currency
continued to slide. 
    Last Friday, as the real traded at a 3-1/2 year low of
around 2.11 per dollar, the central bank called an auction of
traditional currency swaps, derivative contracts that emulate
the sale of dollars in the futures market.
    Brazilian policymakers have used both verbal and market
intervention to keep the real largely within a range of 2 per
dollar to 2.05 since July.
    But other analysts said authorities may be leaning toward
allowing for a weaker currency to support exporters, and they
may allow the real to drift lower, as long as the drop does not
happen with too much velocity. 
    Elsewhere in Latin America, currencies gained along with
emerging market stocks. Boosting investors' appetite for risk
was optimism that U.S. leaders could reach a deal to avert steep
spending cuts and tax hikes that could plunge the world's
largest economy in recession next year. 
    "In the United States, they say there are growing chances of
an agreement to avoid the fiscal cliff and that is bring
optimism to the market," said Gloria Soto, a currency trader at
FXCM Chile.
    The Mexican peso firmed 0.24 percent and the Chilean
peso gained 0.33 percent.

    Latin American currencies at 2140 GMT:
 Currencies                       daily  year-to-d
                                      %       te %
                         Latest  change     change
 Brazil real             2.0963   -0.33      -10.9
                                         
 Mexico peso            12.9381    0.24        8.0
                                         
 Argentina peso*         6.4200    0.78      -26.3
                                         
 Chile peso            479.0000    0.33        8.4
                                         
 Colombia peso       1,815.1000    0.45        6.8
                                         
 Peru sol                2.5760    0.35        4.7
                                         
 * Argentine peso's rate                          
 between brokerages
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