EMERGING MARKETS-Mexico peso, Brazil real slump after Fed rally

Fri Sep 20, 2013 6:14pm EDT

MEXICO CITY, Sept 20 (Reuters) - Mexico's peso tumbled the
most in nearly a month on Friday and Brazil's real weakened
after comments from a Federal Reserve official cut into optimism
that U.S. monetary stimulus could remain in place for some time.
    Latin American currencies still closed the week with big
gains, helped by the Fed's announcement this week that it will
keep its $85 billion monthly bond buying program in place for 
now. 
    The stimulus has supported demand for riskier assets, but
worries about the impact of the withdrawal of stimulus has
spurred big losses in emerging market assets since May.
    St. Louis Fed President James Bullard on Friday told
Bloomberg television that the Fed could scale back its stimulus
at its October meeting, should data point to a stronger economy.
 
    "The market had been very content with the idea that this
liquidity would continue, then you get this kind of comment and
that puts the breaks on the optimism," said Mario Copca, a
strategist at CI Banco in Mexico City.
    Mexico's peso  shed more than 1 percent in
its biggest one-day percentage drop since Aug. 26. Brazil's real
  slipped 0.89 percent, its worst daily loss in about
three weeks. 
    Still, both currencies ended stronger for the week, with the
real adding about 2.8 percent and the Mexican peso gaining
nearly 1.5 percent.
    Mexico's peso may have suffered on Friday from some concerns
of another interest rate cut by the country's central bank,
which could undermine the appeal of local assets to hungry
investors.
    Minutes from the last meeting by Mexico's central bank, when
it unexpectedly cut its main rate to 3.75 percent, showed
policymakers were divided on the decision. 
    However, the economic damage from historic floods hitting
the country could strengthen bets for another cut in October,
analysts said. 
    For the week ending Sept. 17 - the Tuesday before the Fed's
move - currency speculators piled on the biggest amount of bets
on further losses in the peso since June 2012, according to data
from the Commodity Futures Trading Commission released on
Friday. 
    Meanwhile, Brazil is likely to make a second offering of
hard-currency bonds this year after the Fed's move renewed
appetite among global investors for higher-yielding
emerging-market paper, Schroders Plc fund manager James
Barrineau told Reuters on Friday. 


  Key Latin American currencies at 2100 GMT:  
 Currencies                          daily %    YTD %
                                      change   change
                             Latest           
 Brazil real                 2.2180    -0.81    -8.03
                                              
 Mexico peso                12.8635    -1.19     0.01
                                              
 Chile peso                502.1000     0.18    -4.66
                                              
 Colombia peso            1895.9000    -0.68    -6.85
                                              
 Peru sol                    2.7490    -0.58    -7.20
                                              
 Argentina peso              5.7600    -0.04   -14.71

 Argentina peso              9.3700     0.32   -27.64
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