EMERGING MARKETS-Mexican peso hits 20-mth high on inflation; real up

Tue Apr 9, 2013 5:45pm EDT

* Mexico 12-month inflation climbs above c.bank target
ceiling
    * Expectation of dollar inflows support Brazilian real
    * Mexico peso gains 0.3 pct, Brazil real edges up 0.1 pct

    By Walter Brandimarte
    SAO PAULO, April 9 (Reuters) - The Mexican peso hit a
20-month high on Tuesday after higher-than-expected inflation
made it more difficult for the central bank to cut interest
rates, while the Brazilian real edged up as analysts expected
dollar inflows to pick up soon.
    Growing global appetite for risk supported Latin American
currencies in general, but the Chilean peso ended flat
as investors feared a possible central bank intervention to stem
further currency gains.
    The Mexican peso rose 0.3 percent to 12.1540 per
dollar after data showed consumer prices rose faster than
expected in March. The country's 12-month inflation rate hit
4.25 percent, above the central bank's target ceiling of 4
percent for the first time since November. 
    The inflation surprise was seen by analysts as crimping the
central bank's ability to further cut its base interest rate, a
move that could reduce the allure of peso-denominated assets.
    "In our view, inflation with a floor at 3.6 percent and
inflation expectations on the rise will not provide room for
cutting rates," Carlos Capistran, Latin America economist with
Bank of America Merrill Lynch, wrote in a research note.
    "However, given tight monetary conditions on strong Mexican
peso, we believe the central bank could adopt an easing bias
during the summer as inflation gets closer to its floor of 3.6
percent in 2013," he added.
    In Brazil, the real  edged 0.1 percent higher as
investors anticipated higher dollar inflows in the next few
weeks resulting from a pick up in foreign debt sales by
Brazilian companies and higher agricultural exports.
    "We can tell they are trying to sell longer-dated bonds
abroad at higher prices," said Reginaldo Galhardo, a manager at
the currency desk of Treviso brokerage in Sao Paulo.
    Brazilian steelmaker Gerdau on Monday sold $750
million in 10-year bonds, while sources said BTG Investments, a
unit of BTG Pactual bank, is planning to sell
five-year bonds. 
    Global appetite for risk was on the rise after a report
showing benign Chinese inflation raised hopes for a more
accommodative monetary policy from China that boosted
commodities prices.
        
    Latin American FX prices at 2130 GMT:   
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                1.9840     0.10     2.82
                                             
 Mexico peso               12.1540     0.26     5.84
                                             
 Chile peso               466.9000     0.00     2.53
                                             
 Colombia peso           1816.1500     0.02    -2.76
                                             
 Peru sol                   2.5770    -0.04    -1.01
                                             
 Argentina peso             5.1350     0.00    -4.33

 Argentina peso             8.3400    -0.12   -18.71
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