November 28, 2012 / 8:26 PM / 5 years ago

EMERGING MARKETS-Mexico peso gains on US fiscal hopes; real down

By Danielle Fonseca and Jean Arce
    SAO PAULO/MEXICO CITY, Nov 28 (Reuters) - Latin American
currencies were flat to stronger on Wednesday on optimism over
U.S. fiscal cliff negotiations, but the Brazilian real slid as
investors tested the central bank's tolerance to a weaker
currency.
    The Mexican peso gained 0.4 percent to 12.9920 per
dollar, and looked set to hold past the level of 13 per dollar
for the first in three sessions.
    It erased early losses after a top Republican voiced
optimism that his party could broker a deal with the White House
to avoid harsh spending cuts and tax hikes that are set to kick
in next year, potentially driving the world's largest economy
into recession.
    Most Latin American currencies trimmed losses after the
comments by U.S. House Speaker John Boehner, and after President
Barack Obama said he hoped an agreement could be reached before
Christmas.  
    "Above all, the comments made by U.S. lawmakers bolstered
currency markets, especially the Mexican peso which is extremely
linked to the U.S. fiscal cliff discussions," said Ezequiel
Aguirre, a strategist with Bank of America Merrill Lynch in New
York.
    The Brazilian real  weakened 0.4 percent to
2.0893 per dollar, however, as investors wondered if the central
bank would intervene again if the currency continued to approach
the level of 2.1 per dollar. 
    Last Friday, as the real traded around 2.11 per dollar, the
central band called an auction of traditional currency swaps,
derivative contracts that emulate the sale of dollars in the
futures market. 
    The bank sold about half of the 62,800 swaps offered at the
auction, partly cancelling some reverse swaps that are due to
expire early next month, and raising questions whether it would
offer the other half in the next few days.  
    Traders said some investors were also weakening the exchange
rate to push for a more favorable month-end Ptax rate -- an
average dollar-real rate which is used to settle everything from
export payments to foreign loans.
    "It's very likely for the market to push the dollar higher
(against the real) in the next few days as we start to have that
fight over the Ptax. I see chances of a weaker real in the next
few days," said Marcos Trabbold, a currency trader at B&T
brokerage in Sao Paulo.  

    Latin American currencies at 2005 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.0893     -0.4   -10.73
                                             
 Mexico peso               12.9896     0.39     7.54
                                             
 Argentina peso*            6.4500     0.00   -26.67
                                             
 Chile peso               480.6000    -0.06     8.05
                                             
 Colombia peso          1,823.3500     0.04     6.31
                                             
 Peru sol                   2.5850     0.04     4.33
                                             
 * Argentine peso's rate between                    
 brokerages

0 : 0
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