RPT-EMERGING MARKETS-Mexico peso dips to 2-week low, Brazil real slips

Tue May 14, 2013 5:18pm EDT

* Mexico bond yields post biggest jump higher in 9 months
    * Mexico peso slips 0.31 pct, Brazil real off 0.57 pct


    MEXICO CITY, May 14 (Reuters) - Mexico's peso slipped to its
weakest since the start of the month on Tuesday on concerns that
a stronger U.S. economy could lead to a pull-back of monetary
stimulus that has supported demand for riskier emerging market
currencies.
    Brazil's real also weakened after a recent series of solid
U.S. data backed recent speculation about when the U.S. Federal
Reserve could slow or even stop its $85 billion per month buying
of Treasuries and mortgage-backed securities.
    Asset purchase programs by central banks in advanced
economies have dampened yields in their markets, pumping up
global flows to higher-yielding emerging markets.
    "We are seeing signs of economic recovery in the United
States, this is lifting stock markets, and it makes you think
that the Fed could be discussing the reduction of its
non-conventional monetary policy," said Salvador Orozco, a
strategist at Santander in Mexico City.
    The cost of dollars in Mexican pesos rose to hit resistance
around 12.2155 per dollar, the peso's weakest since May 1,
before bouncing back  to 12.1975, 0.31 percent
weaker on the day. Brazil's real  slid 0.57 percent
to bid at 2.0202 per dollar.
    Interest rates on U.S. Treasuries have spiked higher since
last week amid concerns the Fed could taper off its bond
purchases. That has driven up yields in Mexico in tandem.
    The yield on Mexico's benchmark 10-year peso bond
 bid up 5 basis points to 4.65 percent, its highest
since mid-April. 
    The yield has shot up 23 basis points from a record low
close of 4.42 percent last Thursday in its biggest three-day
spike since August 2012, according to Reuters data.
    Ultra-low interest rates in developed economies have fueled
record investments in peso-denominated debt since 2010, driving
Mexican yields down to successive record lows. 
    Orozco said his bank had not seen signs of outflows from
foreigners yet, but that there was a pause in new flows.
    "But just the lack of new flows is enough to hit the peso,"
he said. 

    Latin American FX prices at 2050 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.0202    -0.57     0.98
                                             
 Mexico peso               12.1975    -0.31     5.47
                                             
 Chile peso               477.2000    -0.17     0.31
                                             
 Colombia peso           1839.4500    -0.30    -3.99
                                             
 Peru sol                   2.6020    -0.12    -1.96
                                             
 Argentina peso             5.2325     0.00    -6.12

 Argentina peso             9.1500     9.62   -25.90
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