EMERGING MARKETS-Latam currencies rally as U.S. fiscal deal announced
RIO DE JANEIRO, Oct 16 (Reuters) - Latin American currencies rallied on Wednesday as U.S. Senate leaders announced a bipartisan deal to raise the government debt ceiling and avert a historic default. The Brazilian real climbed more than 1 percent to as much as 2.1551 per dollar, its strongest intraday level in four months, as congressional aides said the U.S. House of Representatives and the Senate are expected to approve the deal later on Wednesday. That would clear the way for President Barack Obama to sign the bill into law before Thursday, when the U.S. Treasury says it will exhaust its ability to issue debt. The Mexican peso rose 0.9 percent, while the Chilean peso climbed 0.6 percent, as an imminent resolution to the U.S. fiscal impasse boosted investors' appetite for risk in general. A U.S. debt default would have roiled markets across the globe. However, the tide could soon turn against emerging market currencies when markets start to focus on the timing of an expected withdrawal of U.S. stimulus measures, analysts warned. "We believe that the eventual resolution to the U.S. debt crisis will provide a further near-term boost to emerging market currencies," strategists with Brown Brothers Harriman wrote in a research note. "While uncertainty about Fed tapering will likely return to the spotlight at some point, we look for a potential period of emerging market gains after U.S. fiscal policy risks have been mitigated," they added. Expectations that the U.S. Federal Reserve would delay the tapering of its bond buying program into 2014 had been growing in the past few weeks as the U.S. fiscal crisis added uncertainty to the performance of the U.S. economy. Latin America FX prices at 1745 GMT: Currencies daily % YTD % change change Latest Brazil real 2.1608 0.83 -5.59 Mexico peso 12.8730 0.90 -0.07 Chile peso 495.7000 0.61 -3.43 Colombia peso 1883.4000 -0.03 -6.23 Peru sol 2.7590 0.36 -7.54 Argentina peso 5.8400 0.00 -15.88 Argentina peso 9.7000 -1.03 -30.10
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