EMERGING MARKETS-Latin American currencies edge lower as US budget talks eyed
* Brazil retail sales rise for 5th consecutive month * Chilean investors speculate about sovereign rating upgrade * Brazil real, Mexico peso edge 0.1 pct lower By Walter Brandimarte RIO DE JANEIRO, Dec 13 (Reuters) - Latin American currencies edged lower on Thursday as trading volumes started to dwindle with the approach of end-year holidays, and the uncertain outcome of crucial U.S. budget negotiations kept many investors on the sidelines. Concerns about negotiations to avoid steep tax hikes and spending cuts in the Unites States dominated world markets, eclipsing the positive impact of new stimulus measures unveiled by the U.S. Federal Reserve on Wednesday. The currencies of Mexico, Brazil and Chile weakened 0.1 percent or more, while the Colombian peso and the Peruvian sol were steady. In Chile, some investors said expectations of a sovereign rating upgrade cushioned the negative currency impact stemming from lower prices of copper, the country's main export product. "The strength of the domestic economy and recent visits from ratings agencies to the country are leading investors to bet that Chile will get a rating upgrade," said Carlos Martinez, head of the money desk at Vantrust Capital in Santiago. "That could bring more dollar inflows to the country, boosting the peso," he added. In Brazil, the real traded around the level of 2.07 per dollar for the fourth consecutive session, after a series of central bank foreign exchange interventions and comments by policymakers indicated the central bank wants the currency to stabilize somewhere between 2.0 and 2.1 per dollar. "The market is cautious. It looks like 2,07 is a comfortable level for the central bank," said Reginaldo Galhardo, a manager at the currency desk of Treviso brokerage in Sao Paulo. Gustavo Godoy, a manager at Daycoval bank, added that investors are "digesting information" provided by policymakers in the past few days. "There are reasons for the exchange rate to go up or down, so investors are just doing modest, intraday trades," he said. Trading volumes could also decline in Brazil's interest rate market as expectations of a stable Selic made it more difficult for investors to build aggressive trading positions. The interest-rate contract maturing in Jan. 2014, one of the most traded, edged lower a single basis point to 7.07 percent after data showed Brazil's retail sales grew for a fifth straight month in October. "The (retail sales) results should help moderate concerns about decelerating domestic demand and economic growth and further reduce expectations for potential additional interest rate cuts in the near term," Felipe Hernandez, a strategist with RBS, wrote in a research note. Latin American FX prices at 1545 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0770 -0.13 -10.04 Mexico peso 12.7625 -0.14 9.46 Argentina peso* 6.4900 -0.15 -27.12 Chile peso 475.2000 -0.21 9.28 Colombia peso 1,794.3000 0.02 8.03 Peru sol 2.5650 0.00 5.15 * Argentine peso's rate between brokerages
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