* U.S. service, job data eases China, Portugal concern
* Mexico and Chile pesos reverse declines, strengthen
* Brazil president considers measures to check real's gain
* Brazilian real weakens; Colombia's Peso, Peru's sol firm
By Jeb Blount
RIO DE JANEIRO, July 6 Latin American
currencies traded mixed on Wednesday as U.S. economic data
eased concern about the global implications of higher borrowing
costs in China and a downgrade of Portuguese debt.
A U.S. employment survey suggested the world's largest
economy will start adding jobs at a faster pace later this
year, while the U.S. service sector slowed in June at a rate
anticipated by economists. For more, see: [ID:nN1E7650H8]
These factors helped Mexico's peso, Latin America's
most-traded currency, reverse an early loss. It firmed 0.1
percent to 11.6275 to the dollar, its seventh gain in eight
sessions that have seen the peso jump than 2 percent.
"In the balance, the positive outlook from the U.S.
outweighed concern about events in Portugal," said Ramon
Cordoba, a currency trader at Base Banca Multiple, a Monterrey,
Mexico gets about 80 percent of its export earnings from
the United States.
Earlier the peso and most other Latin American currencies
weakened on reports from China and Portugal.
China on Wednesday lifted its benchmark lending rate to
6.56 percent, the third hike this year, raising concern the
world's second-largest economy and biggest buyer of iron ore,
copper, soybeans and other Latin American commodities will
In Europe, Moody's Investors Service downgraded Portugal on
Tuesday to Ba2, a "speculative" or "junk" rating. The decision
raised concern about the ability of Europe's banks to lend if
they are saddled with losses from sovereign defaults.
Brazil's real weakened 0.3 percent to 1.568 to the dollar,
its second day of losses after a six-day rally in which the
real rose to its strongest levels in 12 years.
After slipping in early trading on concerns about China and
Portugal, it soon gave up losses to post a small gain.
BRAZIL MULLS CONTROLS
The Brazilian currency reversed direction again to weaken on
expectation President Dilma Rousseff may back measures to halt
the currency's 6 percent gain against the dollar this year.
The increase has undermined the competitiveness of
Brazilian manufactured goods in export markets.
"The real is definitely too strong at its current level,
and (Rousseff) wants to do something about it," a government
source told Reuters. "No decision has been made at this point
... It could be five days, a week, a month." [ID:nN1E7650T5]
Rousseff's concerns come as foreign investors raise their
bets that the real will continue gaining.
These bets, the so called "net real longs," jumped 0.2
percent to a notional value of $23.3 billion on Tuesday from
$23.2 billion on Monday, according to Sao Paulo's BM&F exchange
The foreign net real longs are just shy of the record $23.5
billion recorded last Friday.
The latest increase came the same day as Finance Minister
Guido Mantega said that he was ready to apply new measures to
halt the real's appreciation, including measures aimed at the
futures and derivatives markets. [ID:nL6E7I50OD]
When the foreign net real longs reached $20 billion in
April, the government moved in with new taxes on foreign loans,
expanding so-called soft currency controls.
A real stronger than 1.55 to the dollar is the likely point
at which the government will apply new controls, said Enrique
Alvarez, Latin America analyst with IDEAGlobal in New York.
Chile's peso CLP= reversed early losses to firm 0.3
percent to 465.80 to the dollar, its strongest in two months.
An "excess of dollars" in the market, perhaps from
companies selling their foreign currency for taxes or
investment, may be behind the decline, traders said.
Elsewhere in Latin America, the Colombian peso COP2=STFX
gained 0.2 percent to 1,766.00 to the dollar, while Peru's sol
PEN=PE gained 0.2 percent to 2.745.
(Additional reporting by Brian Winter in Sao Paulo, Froilan
Romero in Santiago; Editing by Dan Grebler)