EMERGING MARKETS-Latam FX drops on growth concerns; Mexico peso up
* Currencies react to poor US, Chinese data released during holiday * Mexican peso gains as Carstens says c.bank has no easing bias * ECB cuts benchmark interest rate, hints at further easing By Walter Brandimarte RIO DE JANEIRO, May 2 (Reuters) - Most Latin American currencies weakened on Thursday as prospects for the region's exports were hurt by poor U.S. and Chinese economic data released on Wednesday, when regional markets were closed for the Labor Day holiday. A noteworthy exception was the Mexican peso, the most liquid Latin American currency, which had already weakened on Wednesday in overseas trading despite the local holiday. It gained 0.3 percent on Thursday after the European Central Bank cut interest rates and left the door open to additional monetary stimulus that could drive investors to higher-yielding emerging-market assets. Also boosting the Mexican peso were comments by central bank chief Agustin Carstens, who said markets had read too much into some of his recent remarks about the possibility of another interest rate cut this year. "Carstens seems to be correcting comments that appeared to contradict what had been suggested by recent central bank statements," said Pedro Tuesta, an economist with 4Cast consultancy in Washington. "The series of comments left markets confused." Carstens' comments had weighed on the peso earlier this week as lower interest rates could reduce the currency's appeal. Other Latin American currency markets focused on the recent economic data pointing to a slower global economic recovery, however. Among those, two separate reports on Wednesday showed China's factory sector unexpectedly slowed last month while the U.S. manufacturing sector expanded only modestly in April. The Brazilian real dropped 0.6 percent while the Chilean peso fell 0.2 percent. Some analysts said comments by ECB chief Mario Draghi, who said the bank was "technically ready" to cut its deposit rate into negative territory, added to investors' concerns about the state of the global economy rather than encouraging risk taking. "The market is taking Draghi's remarks as an alert. So the first reaction is to sell (risk assets), rush to the dollar, and think later about the real implications of those (possible) measures," said Luciano Rostagno, chief strategist with WestLB bank in Brazil. Latin American FX prices at 1810 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0123 -0.61 1.38 Mexico peso 12.1745 0.27 5.67 Chile peso 471.7000 -0.17 1.48 Colombia peso 1838.5000 -0.71 -3.94 Peru sol 2.6450 -0.08 -3.55 Argentina peso 5.1900 0.00 -5.35 Argentina peso 9.5900 -1.98 -29.30
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