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EMERGING MARKETS-Mexico peso hits 7-week low, Brazil real dips
February 26, 2013 / 12:00 AM / 5 years ago

EMERGING MARKETS-Mexico peso hits 7-week low, Brazil real dips

* Brazil yields see volatile trade on central banker
comments
    * Brazil real dips 0.33 pct, Mexico peso sheds 0.69 pct


    MEXICO CITY, Feb 26 (Reuters) - Mexico's peso slumped to a
seven-week low on Monday and Brazil's real weakened after
elections in Italy revived concerns about Europe's debt crisis,
hitting higher-risk assets around the world.
    A huge protest vote by Italian voters enraged by economic
hardship pushed the country toward a congressional deadlock
after voting projections showed no coalition was strong enough
to form a government. 
    "This has put in doubt the structural reforms needed by
Italy's economy," said Gabriela Siller, an economist at Mexican
brokerage BASE. "Increased risk aversion by investors fed into
higher demand for safe-haven assets."
    Since late 2009, global markets have been repeatedly spooked
by concerns that Europe's debt troubles could spark another
global financial crisis.
    The Mexican peso shed 0.69 percent to end at 12.7980
per U.S. dollar while the Brazilian real  bid 0.33
percent weaker at 1.9765 per greenback. 
    Yields on Brazilian interest rate futures saw
volatile trade as investors eye the chance that policymakers
could raise the country's benchmark rate next week from a record
low of 7.25 percent to head off rising inflation. 
    The market has priced in slightly more than even odds that
the central bank will hold interest rates steady on March 6,
with a less than a 50 percent chance for a 25 basis point hike.
 
    Central Bank President Alexandre Tombini said in a Sunday
interview with The Wall Street Journal that inflation has been
more resilient than policymakers would like it to be.
 
    Tombini reiterated that the central bank sets monetary
policy based upon inflation, not economic growth targets, in
comments that sounded like an effort to allay market concerns
that the bank could tolerate higher inflation rates to help
foster growth in Brazil.
    Brazil's central bank last year cut its benchmark rate to a
record low to help support a flagging economy, but inflation has
been rising even as growth remains sluggish.
    In a presentation to investors in New York later on Monday,
traders said Tombini did not sound like he was about to raise
interest rates. 
    Many analysts believe that the central bank will first alter
the language it used in the minutes of its previous monetary
policy meeting, when it promised to keep rates unchanged for a
"prolonged period," before actually hiking the Selic.
    
    Latin American FX prices at 2330 GMT:
    
    
 Currencies                           Daily  YTD pct
                                        pct   change
                            Latest   change  
 Brazil real                1.9765    -0.33     3.21
                                             
 Mexico peso               12.7980    -0.69     0.52
                                             
 Chile peso               472.9000     0.11     1.23
                                             
 Colombia peso           1813.0000    -0.78    -2.59
                                             
 Peru sol                   2.5830    -0.08    -1.24
                                             
 Argentina peso             5.0325    -0.05    -2.38

 Argentina peso             7.7600     0.52   -12.63

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