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