EMERGING MARKETS-Latam currencies slump as Italy fans risk aversion
* 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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