EMERGING MARKETS-Latam FX firm but real drops after Monday rally

Tue Jul 16, 2013 12:48pm EDT

RIO DE JANEIRO, July 16 (Reuters) - Most Latin American
currencies extended their previous session's gains on Tuesday on
hopes U.S. Federal Reserve Chairman Ben Bernanke will reassure
investors in the next few days that the bank's monetary stimulus
should remain in place for now.
    The exception was the Brazilian real, which posted losses
after jumping nearly 2 percent in the previous session, its
biggest one-day gain in more than a year. Traders said Monday's
rally was exaggerated. 
    Bernanke is set to give testimony to Congress on Wednesday
and Thursday, and analysts say he is likely to repeat his recent
comments that the Fed's monetary policy needs to remain highly
accommodative for now.
    Fears the Fed would soon start tapering its bond-buying
program, which for years has fueled global appetite for risk,
had triggered a selloff in emerging markets in the past few
weeks. 
    * Brazil's real  lost 1 percent to 2.2454 per
dollar, one day after China's second-quarter gross domestic
product (GDP) data eased fears of an economic hard-landing in
the world's largest consumer of commodity exports, supporting
emerging market currencies in general.
    * Analysts said that, in the case of Brazil, Monday's
currency rally seemed exaggerated. "There was a lot of people
changing their views on the real yesterday, which caused the
currency to rally," said Pedro Tuesta, a Washington-based
analyst with 4Cast consultancy. "That was yesterday. Today it's
the reaction to the over reaction of yesterday.
    * Mexico's peso was steady at 12.6540 per dollar,
after reaching the intraday mark of 12.5682, its strongest level
since the end of May. 
    * The Mexican currency has been supported by expectations of
ongoing structural reforms in investment. President Enrique Pena
Nieto's announcement on Monday that $300 billion are expected to
be invested in major infrastructure projects over his six-year
term supported market optimism, analysts said. 

    Latin American FX prices at 1630 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.2454    -0.97    -9.15
                                             
 Mexico peso               12.6540     0.05     1.66
                                             
 Chile peso                holiday      N/A    -4.51
                                             
 Colombia peso           1879.0000     0.32    -6.01
                                             
 Peru sol                   2.7590     0.18    -7.54
                                             
 Argentina peso             5.4325    -0.05    -9.57

 Argentina peso             8.7200    -1.61   -22.25
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