EMERGING MARKETS-Mexico's peso flat on renewed rate cut threat
MEXICO CITY, Feb 12 (Reuters) - Mexico's peso was little changed on Tuesday after the country's central bank governor reaffirmed his threat to cut interest rates following the biggest slump in industrial output in nearly four years. The currency rose 0.09 percent to trade at 12.7260 per dollar after central bank governor Agustin Carstens reiterated the Bank of Mexico's new stance that lower inflation and slower growth might lead the bank to cut the benchmark interest rate. "Let's say the environment could become such that it would be advisable to lower interest rates," he told Milenio news network in an interview late on Monday. "It's not a done deal, but it would be fair to say that the economy has moved into an area where it is reasonable to consider that possibility." Yields on short term interest rate swaps edged lower as the market increased bets on the chance of a 25 basis point cut by March 8 to around 86 percent on Tuesday, from around 30 percent a day earlier. The swaps market has fully priced in a cut by April. On Monday, data showed Mexican industrial production in December posted its biggest monthly loss since a deep recession four years ago as factories and builders slowed, bolstering bets that the central bank could cut interest rates. Analysts, however, said markets have mostly absorbed the likelihood of a one-off cut along with the country's softening growth, which has kept the peso from falling off dramatically. Indicators of growth have been slowing, "inflation has been falling, but it's not like they are falling off a cliff," said Win Thin, a currency strategist at Brown Brothers Harriman. In an environment where many emerging market countries like Turkey, Poland, and Hungary are easing monetary policy, he added, "4.5 percent is still pretty good." The Bank of Mexico has kept interest rates on hold since mid-2009, as it has aimed to balance dueling goals of low inflation and economic muscle. Thin said he expects the peso to continue to trade in the 12.60 to 13.00 per dollar range in the short term. Brazil's real has entered the traditional Carnival lull that halts Brazilian markets for most of the week. Latin American FX prices at 18:54 GMT Currencies daily YTD % % change change Latest Brazil real 1.9715 0.00 3.48 Mexico peso 12.7260 0.09 1.09 Chile peso 471.600 0.15 1.51 0 Colombia peso 1780.20 0.22 -0.80 00 Peru sol 2.5720 0.27 -0.82 Argentina peso 4.9950 -0.05 -1.65 Argentina peso 7.6500 0.39 -11.37
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