Emerging Markets-Latam currencies sink, Venezuela bonds fall

By Walker Simon

NEW YORK, June 23 (Reuters) - Latin American currencies broadly fell on Monday, accentuated by tumbles in the pesos of Colombia and Chile, on dollar strength which spelled weaker prices for the region's key agricultural and metals exports.

In contrast, emerging market bond yields' spread over U.S. Treasuries, a key investment risk perception gauge, were stable, according to J.P. Morgan's Emerging Bond Index Plus 11EMJ. They tightened by 1 basis point to 259 basis points.

The price of emerging market bonds slipped by 0.14 percent, dragged lower by heavyweight Venezuela, whose bonds fell furthest, by 0.46 percent, despite the soaring price of oil, the country's main export.

Venezuela's benchmark global bond due in 2027 VENGLB27=RR, long one of the most traded in the emerging markets universe, fell 0.875 point to bid 94.000 with a yield of 9.953 percent. The bond has weakened over the past two weeks, analysts said, on a drumbeat of downbeat domestic economic news.

On the currency front, the weakening was widespread.

"You have currencies falling all through Latin America, because the dollar's rise today is accompanied by a fall in commodities' prices, which are the region's key exports," said IDEAglobal analyst Bertrand Delgado in New York.

Colombia's peso COP= sank 3.2 percent to a buy-sell rate of 1,726.50/1,726.90 after the central bank on Friday night said it would buy $20 million a day in the local market, stepping up the pace from $150 million in monthly purchases.

The bank said it aims to buy about $2.6 billion in dollars by the end of 2008 to build a bulwark against potential global market instability. It also seeks to retain Colombian exports' competitiveness. The peso rose 16 percent against the dollar through Friday.

On global markets, the dollar rose broadly ahead of a Federal Reserve meeting this week that investors expect to include stern talk about the risks of rising inflation.

A stronger U.S. currency makes metals priced in dollars more expensive for holders of other currencies.

U.S. copper futures HGN8 fell 0.9 percent Monday on the stronger dollar tone and worries about weaker Chinese demand.

Chile's main export is copper. Its peso CLP= fell about 1.3 percent to 501.00/501.30. Weighing on the peso, Delgado said, was a surge in the price of oil, which Chile must import.

Oil rose 1 percent Monday to $137.73 a barrel on Nigerian supply disruptions and escalating Iran-Israel tensions.

But the rise failed to help OPEC member Venezuela's bonds.

"Venezuelan (bonds) should be way higher if you look at the price of oil," said Alberto Bernal, head of emerging markets fixed income research of Bulltick Capital Markets in Miami.