EMERGING MARKETS-Mexican peso gains on strong US manufacturing

Fri Feb 1, 2013 4:55pm EST

* Mexico peso strongest in two weeks, up 0.82 pct
    * Brazil real around 1.98/dollar


    By Walter Brandimarte and Alexandra Alper
    MEXICO CITY, Feb 1 (Reuters) - The Mexican peso rose on
Friday after data revealing a pick-up in U.S. manufacturing
fueled optimism about Latin America's No. 2 economy, while other
Latin American currencies were mostly flat.
    Mexico's economy is deeply interwined with its northern
neighbor, and its currency gained 0.82 to trade at
12.6075 after data showed U.S. factory activity hit a nine-month
high in January. The peso was trading at its firmest since Jan.
18. 
    The strong showing came as central bank meeting minutes
revealed board members disagreed over whether to send a signal
they might cut interest rates if inflation keeps cooling and
growth stalls. 
    The Mexican peso had fallen more than 1 percent after
reaching a 10-month high in mid-January, when the central bank
warned it could cut the benchmark interest rate, damaging the
appeal of the peso for investors. 
    The revelation of the division among board members over the
threat may also have contributed to Friday's rally, analysts
said.
    "Probably, the market took it to mean the chances of a cut
may be a little lower ... or that the minutes are a little less
'dovish' statement," said Ezequiel Aguirre, a Latin America
strategist at Bank of America in New York.
    The Brazilian real  rose 0.05 percent to 1.9875
per dollar as investors slowly pushed the currency higher on the
view that the central bank would tolerate a stronger exchange
rate to fend off inflation pressures.
    Citi strategists Kenneth Lam and Douglas Comin wrote in a
research note that there is "some room for the real to rally
further, but 1.95 will probably be the lower end of the range"
that the government will tolerate in the near term.
    In the opposite direction, the Chilean peso 
weakened 0.04 percent to 471.3 as investors digested central
bank comments about the currency. 
    The comments, presented in minutes of the central bank's
latest monetary policy meeting, showed no signs of heightened
concern about the Chilean peso's recent gains, said Goldman
Sachs' Senior Economist Alberto Ramos.
    "This is consistent with our view that the authorities will
continue to look for signs of currency misalignment and that
intervention in the FX market is not imminent," Ramos wrote in a
note to clients.
    
    Latin American FX prices at 1515 GMT:
 Currencies                       Daily pct  YTD pct
                                     change   change
                                             
                          Latest             
 Brazil real              1.9875       0.05     2.64
                                             
 Mexico peso             12.6075       0.82     2.04
                                             
 Chile peso             471.3000      -0.04     1.57
                                             
 Colombia peso          1776.100      -0.05    -0.57
                               0             
 Peru sol                 2.5760      -0.04    -0.97
                                             
 Argentina peso           4.9850      -0.10    -1.45

 Argentina peso           7.9000       0.25   -14.18
FILED UNDER: