EMERGING MARKETS-Brazil yields dip on lower growth estimates

Mon Jan 14, 2013 6:10pm EST

* Brazil economy seen expanding at slower rate this year
    * Expectations of continued U.S. Fed stimulus support FX
    * Brazil real gains 0.17 pct; Mexican peso up 0.31 pct


    By Danielle Fonseca and Jean Arce
    SAO PAULO/MEXICO CITY, Jan 14 (Reuters) - Yields on Brazil's
interest-rate futures dipped on Monday after analysts cut their
2013 economic growth estimates for a second week, backing bets
for stable interest rates this year despite rising inflation.
    Economists polled by the central bank in a weekly survey now
see Brazil's economy expanding 3.2 percent this year, below the
3.26 percent forecast in the previous survey, even as inflation
estimates keep going up. 
    The data added to expectations that Brazil's central bank
will leave inflation concerns on the back burner and keep the
base Selic rate at an all-time low of 7.25 percent during 2013.
    "Markets are still focused on activity numbers," said Paulo
Nepomuceno, chief strategist at Coinvalores brokerage in Sao
Paulo. 
    But persistently high inflation numbers could force rates up
in the future. "Soon markets would start paying more attention
to inflation, then maybe we'll have a different shape to the
interest-rate curve," he 
    Yields on interest-rate contracts maturing in January 2014
, one of the most traded, dipped 1 basis point to 7.10
percent.
    
    CURRENCIES MODESTLY STRONGER
    Latin America's most traded currencies firmed on Monday,
after comment by Federal Reserve Chairman Ben Bernanke suggested
the U.S. central bank will not soon back away from its
ultra-loose monetary policy to support a still-fragile U.S.
economic recovery.
    The Fed's near-zero interest rate and asset purchase
programs have driven down yields on U.S. debt and driven
investors into the higher-interest rate debt of emerging
markets.
    Bernanke said the Fed still had more "ammunition," and he
highlighted the risks to the U.S. economy, including current
debt ceiling and budget talks.
    "Investors like to see stimulus maintained," said Jorge
Gordillo, an analyst at CI Banco.
    In Mexico, the peso firmed 0.31 percent to 12.62 per
dollar to close at its strongest level in 10 months. The
currency posted even stronger intra-day levels on Friday, but
the peso has not been able to hold onto gains past 12.60 per
dollar in the last two sessions.
    Analysts warn that further gains by the peso could be
limited as investors eye a debate in the U.S. Congress about
lifting the country's borrowing limit to avoid a potentially
disastrous debt default.
    The peso has gained more than 3 percent since late December.
"We could still see a bit more of the rally, but it is nearly at
its end," Gordillo said. 
    The Brazilian real  gained 0.17 percent on hopes
that the data would show China, the largest consumer of Latin
American commodity exports, continued to grow at a healthy pace
at the end of 2012.
    On the other hand, the Chilean peso dropped 0.27
percent to 473.50 per dollar, as investors worried the central
bank would soon intervene to curb a recent rally that has added
more than 1 percent to the currency's value since the beginning
of the year. 

    Latin American FX prices at 2230 GMT:
 Currencies                       daily %  year-to
                                   change  -date %
                          Latest            change
 Brazil real              2.0315     0.17     0.42
                                           
 Mexico peso               12.62     0.31     1.89
                                           
 Argentina peso*          7.2300    -0.41    -6.22
                                           
 Chile peso             473.5000    -0.27     0.95
                                           
 Colombia peso        1,759.4500     0.22     0.42
                                           
 Peru sol                 2.5370     0.24     0.39
                                           
 * Argentine peso's rate between                  
 brokerages
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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