December 13, 2012 / 4:10 PM / in 5 years

EMERGING MARKETS-Latin American currencies edge lower as US budget talks eyed

* Brazil retail sales rise for 5th consecutive month
    * Chilean investors speculate about sovereign rating upgrade
    * Brazil real, Mexico peso edge 0.1 pct lower

    By Walter Brandimarte
    RIO DE JANEIRO, Dec 13 (Reuters) - Latin American currencies
edged lower on Thursday as trading volumes started to dwindle
with the approach of end-year holidays, and the uncertain
outcome of crucial U.S. budget negotiations kept many investors
on the sidelines.
     Concerns about negotiations to avoid steep tax hikes and
spending cuts in the Unites States dominated world markets,
eclipsing the positive impact of new stimulus measures unveiled
by the U.S. Federal Reserve on Wednesday.
    The currencies of Mexico, Brazil  and
Chile weakened 0.1 percent or more, while the Colombian
peso and the Peruvian sol were steady.
    In Chile, some investors said expectations of a sovereign
rating upgrade cushioned the negative currency impact stemming
from lower prices of copper, the country's main export product.
    "The strength of the domestic economy and recent visits from
ratings agencies to the country are leading investors to bet
that Chile will get a rating upgrade," said Carlos Martinez,
head of the money desk at Vantrust Capital in Santiago.
    "That could bring more dollar inflows to the country,
boosting the peso," he added.
    In Brazil, the real traded around the level of 2.07 per
dollar for the fourth consecutive session, after a series of
central bank foreign exchange interventions and comments by
policymakers indicated the central bank wants the currency to
stabilize somewhere between 2.0 and 2.1 per dollar.
    "The market is cautious. It looks like 2,07 is a comfortable
level for the central bank," said Reginaldo Galhardo, a manager
at the currency desk of Treviso brokerage in Sao Paulo.
    Gustavo Godoy, a manager at Daycoval bank, added that
investors are "digesting information" provided by policymakers
in the past few days.
    "There are reasons for the exchange rate to go up or down,
so investors are just doing modest, intraday trades," he said.
    Trading volumes could also decline in Brazil's interest rate
market as expectations of a stable Selic made it more difficult
for investors to build aggressive trading positions.
    The interest-rate contract maturing in Jan. 2014,
one of the most traded, edged lower a single basis point to 7.07
percent after data showed Brazil's retail sales grew for a fifth
straight month in October. 
    "The (retail sales) results should help moderate concerns
about decelerating domestic demand and economic growth and
further reduce expectations for potential additional interest
rate cuts in the near term," Felipe Hernandez, a strategist with
RBS, wrote in a research note.
    Latin American FX prices at 1545 GMT:
 Currencies                         daily %    YTD %
                                     change   change
 Brazil real                2.0770    -0.13   -10.04
 Mexico peso               12.7625    -0.14     9.46
 Argentina peso*            6.4900    -0.15   -27.12
 Chile peso               475.2000    -0.21     9.28
 Colombia peso          1,794.3000     0.02     8.03
 Peru sol                   2.5650     0.00     5.15
 * Argentine peso's rate between                    
0 : 0
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