EMERGING MARKETS-Latam currencies slump as Italy fans risk aversion

Tue Feb 26, 2013 3:34pm EST

* European markets sell off as Italy election ends in
stalemate
    * Mexican peso hits weakest level in 2013, at 12.9016/dlr
    * Brazil real weakens 0.4 pct, Chile peso little changed

    By Natalia Cacioli
    SAO PAULO, Feb 26 (Reuters) - Latin American currencies sold
off on Tuesday, with the Mexican peso dropping to its weakest
level this year, as a stalemate in Italy's parliamentary
elections posed a threat of prolonged financial crisis in the
euro zone.
    Mexico's peso  led losses in the region as
investors sold the most liquid Latin American currency to take
cover in the perceived safety of the dollar. It last traded at
12.8675 per U.S. dollar, after slumping to 12.9016 per
greenback, its weakest intraday level since Jan. 2.
    "This is responding to issues in Europe," said Salvador
Orozco, a strategist at Santander in Mexico City. "Every time
there is some international disequilibrium, the peso is affected
due its liquidity."  
    The cost of dollars in pesos shot above its 100-day simple
moving average, around 12.8558 per dollar. The dislocation from
recent pricing could spur bargain hunters to jump in, or it
could mark the start of a trend of peso weakness.
    The Brazilian real  slid 0.4 percent in its
second straight session of losses to close at 1.9845 per dollar.
    "We haven't seen any (dollar) inflows. The market is really
bad abroad, with a lot of risk aversion," said a trader with a
large Brazilian bank.
    The real was also pressured by comments by Finance Minister
Guido Mantega, who poured cold water on speculation that the
government could remove a financial transaction tax known as IOF
on foreign investment in Brazilian bonds. 
    That IOF tax was one of the measures imposed by the
Brazilian government to stop excessive dollar inflows to the
country, but speculation that it could be scrapped increased as
investors expected policymakers to favor a stronger real to curb
the price of imported goods and fight inflation.
    In Chile, however, the peso recovered from early
losses to close little changed at 473.20 per dollar following a
rebound in the price of copper, the country's main export
product.
    
    Latin American FX prices at 2030 GMT:
    
 Currencies                           Daily  YTD pct
                                        pct   change
                            Latest   change  
 Brazil real                1.9845    -0.40     2.70
                                             
 Mexico peso               12.8630    -0.51     0.01
                                             
 Chile peso               473.2000    -0.06     1.16
                                             
 Colombia peso           1818.0500    -0.28    -2.86
                                             
 Peru sol                   2.5840    -0.04    -1.28
                                             
 Argentina peso             5.0350     0.00    -2.43

 Argentina peso             7.8000    -0.26   -13.08
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