EMERGING MARKETS-Mexico peso up on Cyprus optimism; Argentina peso hits new low

Wed Mar 20, 2013 3:32pm EDT

* Investors bet Cyprus will avoid financial meltdown
    * Dollar outflows weigh on Brazil's real, which drops 0.2
pct
    * Argentine peso sinks to all-time low of 8.7/dlr on black
market
    * Mexican peso gains 0.4 pct, Chilean peso flat

    By Walter Brandimarte
    RIO DE JANEIRO, March 20 (Reuters) - Mexico's peso gained on
Wednesday on hopes Cyprus will avoid a financial meltdown, but
dollar outflows and expectations of lower iron ore prices
weighed on other Latin American currencies.
    Argentina's peso sold off on the black market for the second
consecutive day, hitting an all time low of 8.5 per dollar, as
Argentines scrambled to buy greenbacks after the government
raised a tax on foreign purchases made with credit cards.
    The Mexican peso gained 0.6 percent to 12.3703 per
dollar after strengthening earlier to as much as 12.3640, a
1-1/2-year high.
    Supporting gains were hopes that Cyprus will find a way to
secure financial support even after the island's parliament
rejected the terms of a EU bailout which included a tax over
bank deposits.
    "There has been some relief among investors, who are waiting
for some measure to replace the tax on Cyprus' bank deposits,"
said Mauricio Nakahodo, an economic consultant with
Tokyo-Mitsubishi bank in Sao Paulo.
    The U.S. Federal Reserve's decision to stick to its
aggressive bond-purchase plan also contributed to the global
weakness of the dollar. 
    The Brazilian real  weakened 0.2 percent,
however, with traders citing localized dollar outflows. In the
first half of the month, Brazil has recorded outflows of $990
million, according to central bank data. 
    A Goldman Sachs estimate for lower iron ore prices over the
next three years also weighed on the Brazilian real, a trader
said, as it reduced prospects for dollar inflows from iron ore
exports. 
    In Argentina, the peso tumbled nearly 5 percent on the black
market to 8.70 units per dollar, increasingly far from
an official exchange rate of 5.095 pesos per dollar,
after the government increased controls aimed at keeping dollars
in the country. 
    In its latest attempt to curb dollar outflows, President
Cristina Fernandez hiked a levy on credit card purchases abroad
by 5 percentage points to 20 percent. She also extended the
measure to holiday packages paid for at home. 
    Buying dollars and other foreign currency at the official
exchange rate is virtually impossible in Argentina, which forces
many to turn to the black market to avoid paying the credit card
levy.
    
    Latin American FX prices at 1915 GMT: 
    
 Currencies                           Daily  YTD pct
                                        pct   change
                            Latest   change  
 Brazil real                1.9905    -0.23     2.49
                                             
 Mexico peso               12.3703     0.56     3.99
                                             
 Chile peso               472.9000    -0.04     1.23
                                             
 Colombia peso           1818.1500    -0.38    -2.87
                                             
 Peru sol                   2.5910     0.12    -1.54
                                             
 Argentina peso             5.0950     0.05    -3.58

 Argentina peso             8.7000    -4.94   -22.07
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A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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