EMERGING MARKETS-Latin American currency down on China inflation
* China inflation at 7-month high; cuts room for stimulus * Brazil real may test 2-per-dollar level soon * Brazil real falls 0.3 pct; Mexico peso drops 0.36 percent By Walter Brandimarte RIO DE JANEIRO, Jan 11 (Reuters) - Latin American currencies weakened on Friday as investors worried that China, the main consumer of the region's commodity exports, will have limited room to stimulate its economy because of rising inflation. Losses were limited as many analysts remain bullish about Latin American currencies, either on expectations of solid economic performance, as is the case in Mexico, or because of concerns over inflation, as in Brazil. After a good rally so far this year, however, some investors seemed ready to pocket part of those gains. The profit taking was triggered by data showing inflation in China accelerated to a seven-month high in December. The Mexican peso dropped 0.36 percent to 12.6500 per dollar, still holding on to gains of about 1.7 percent so far in the year. It closed on Thursday near a 10-month high after data showed the country's economy accelerated in October. But data released on Friday revealed that Mexico's industrial output in November missed expectations for a stronger rebound, despite edging up to a five-month high. The Brazilian real lost 0.3 percent to 2.035 per dollar, still up 0.25 percent since Jan. 1. As inflation in Brazil remains above the center of a government target range, investors bet the central bank would keep the real stronger than 2.05 per dollar to avoid a pass-through to prices. Some even believe policymakers might allow the real to gain slightly past 2 per dollar - the lower limit of a de facto trading range where the real has been confined since July. "The balance of risks has shifted towards inflation," JP Morgan analysts said in a research note. "A persistent and broad-based weakness of the U.S. dollar could provide a cue for an eventual test of the 2 reais-per-dollar level." Latin American FX prices at 2100 GMT: Currencies daily % YTD % change change Latest Brazil real 2.035 0.3 0.25 Mexico peso 12.6500 -0.36 1.7 Argentina peso* 7.1800 0.97 -5.57 Chile peso 472.2000 -0.30 1.38 Colombia peso 1,763.3700 -0.02 0.15 Peru sol 2.5430 0.28 0.31 * Argentine peso's rate between brokerages
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