* Mexico peso falls 0.4 pct to lowest level in 2 weeks
* Chile peso drops with copper prices, intervention fears
* Brazil real closes flat due to Sao Paulo holiday
By Walter Brandimarte
RIO DE JANEIRO, Jan 25 The Mexican peso led Latin American
currencies lower on Friday as investors, fearing a possible interest rate cut by
the country's central bank, pocketed some of the currency's recent gains.
In Brazil, the real closed flat at 2.0305 per dollar in an
extremely thin market due to a holiday in Sao Paulo, the country's financial
Regional currency losses were exacerbated by the peso's fragile technical
position on the Chicago exchange, where investors have placed large bets for a
stronger Mexican currency. Analysts say such bets could quickly reverse,
prompting the peso to sell off.
The peso dropped 0.4 percent to trade at 12.698 per dollar, after
touching its weakest level in over two weeks.
It has lost around 1 percent since last Friday, when the Mexican central
bank said it could ease its monetary policy if inflation continues to cool and
the economy loses steam. Lower rates could reduce the allure of peso-denominated
The central bank's warning represented an abrupt reversal from its previous
threat to raise interest rates, leaving some investors wondering whether
policymakers were actually more concerned about the strength of the currency.
"The central bank's about face, coming as it did after a bout of peso
strength, is likely to be viewed by many as a first sign of a possible policy
response if the peso gains further ground," Morgan Stanley's analyst Luis
Arcentales wrote in a research note.
Elsewhere in Latin America, the Chilean peso lost 0.3 percent to
471.80 per dollar, pressured by lower prices of copper, Chile's top export.
Fears that Chilean policymakers may intervene in the market to curb the
currency's strength also weighed on the peso, which has gained about 1.5 percent
since the beginning of the year.
Latin American FX prices at 1910 GMT:
Currencies Daily YTD pct
Brazil real 2.0305 0.00 0.47
Mexico peso 12.6980 -0.45 1.31
Chile peso 471.8000 -0.34 1.46
Colombia peso 1779.5000 -0.01 -0.76
Peru sol 2.5580 -0.12 -0.27
Argentina peso 4.9650 -0.05 -1.06
Argentina peso 7.6000 -0.53 -10.79