EMERGING MARKETS-Mexico peso underperforms peers on rate cut bets
* Latam currencies gain as Wall St drives risk appetite higher * Argentine peso closes weaker than 5/dlr for 1st time * Brazil real gains 0.4 pct, Mexican peso little changed By Walter Brandimarte RIO DE JANEIRO, Feb 13 (Reuters) - The Mexican peso underperformed its Latin American peers on Wednesday as a growing number of investors considered a possible interest rate cut by the country's central bank later this year. Most foreign exchange markets in the region gained in sync with Wall Street, where the S&P 500 index hit its highest level in more than five years. Another exception was the Argentine peso, which weakened past the level of 5 per U.S. dollar for the first time in the interbank market. The Brazilian real resumed trading for a shortened post-Carnival session with gains of 0.4 percent as a U.S. stocks rally fueled investors' appetite for riskier emerging market assets. "Foreign investors are less averse to risk," said Mauricio Nakahodo, an economic consultant with Tokyo-Mitsubishi bank in Sao Paulo, noting that trading was very thin as many market players remain on vacation for the rest of the week. The Brazilian foreign exchange market seems to have found the boundaries of a new informal trading band after the central bank intervened on Friday to halt a rally that had pushed the real to the level of 1.95 per dollar. The Chilean peso and the Colombian peso followed the real higher, with gains of 0.2 and 0.1 percent respectively. In Mexico, however, the peso traded flat to weaker as investors saw reasons piling up for the central bank to make good on its threat to cut interest rates this year, a move that would likely reduce the allure of Mexican bonds and currency. "For the first time in years, we see a real risk of a rate cut from Banxico this year," analysts with Brown Brothers Harriman wrote in a research note. "It could be as early as in the second quarter, though we favor the third quarter as being more likely," they added. In Argentina, the peso weakened 0.1 percent to 5.0025 per dollar, closing past the level of 5 per dollar for the first time in formal interbank trade, where the central bank intervenes by buying and selling dollars to control the currency's level and smooth out any sudden price variations. In the black market, as measured by Reuters, the local currency firmed slightly to reach a bid price of 7.63 pesos per dollar, maintaining the spread between the two markets at about 53 percent. The government slapped tough controls on buying foreign currency in October 2011 and they have been steadily tightened since then, making it increasingly difficult for Argentines to secure dollars at the official exchange rate. That means more and more are forced to pay the hefty premium in the black market. "In truth, the peso's arrival at this level was only a matter of time - Argentina has operated a managed depreciation against the U.S. dollar for the best part of the past decade," London-based Capital Economics said in a briefing note. "The progressive tightening of capital controls since late 2011 has made the official market off-limits for many local businesses and consumers. The result has been an increase in volumes traded on the black market." Latin American FX prices at 1805 GMT: Currencies Daily YTD pct pct change Latest change Brazil real 1.9637 0.40 3.89 Mexico peso 12.6925 0.03 1.35 Chile peso 470.5000 0.23 1.74 Colombia peso 1778.0500 0.12 -0.68 Peru sol 2.5690 0.08 -0.70 Argentina peso 5.0025 -0.10 -1.80 Argentina peso 7.6300 0.52 -11.14
- Insight: How U.S. spying cost Boeing multibillion-dollar jet contract
- Exclusive: Secret contract tied NSA and security industry pioneer |
- With Fed out of the way, what's next on Wall Street?
- Yemeni al Qaeda says attack on hospital was mistake
- Insight: For Chinese farmers, a rare welcome in Russia's Far East