October 16, 2013 / 6:04 PM / 4 years ago

EMERGING MARKETS-Latam currencies rally as U.S. fiscal deal announced

RIO DE JANEIRO, Oct 16 (Reuters) - Latin American currencies
rallied on Wednesday as U.S. Senate leaders announced a
bipartisan deal to raise the government debt ceiling and avert a
historic default.
    The Brazilian real  climbed more than 1 percent
to as much as 2.1551 per dollar, its strongest intraday level in
four months, as congressional aides said the U.S. House of
Representatives and the Senate are expected to approve the deal
later on Wednesday. 
    That would clear the way for President Barack Obama to sign
the bill into law before Thursday, when the U.S. Treasury says
it will exhaust its ability to issue debt.
    The Mexican peso rose 0.9 percent, while the Chilean
peso climbed 0.6 percent, as an imminent resolution to
the U.S. fiscal impasse boosted investors' appetite for risk in
general. A U.S. debt default would have roiled markets across
the globe.
    However, the tide could soon turn against emerging market
currencies when markets start to focus on the timing of an
expected withdrawal of U.S. stimulus measures, analysts warned.
    "We believe that the eventual resolution to the U.S. debt
crisis will provide a further near-term boost to emerging market
currencies," strategists with Brown Brothers Harriman wrote in a
research note.
    "While uncertainty about Fed tapering will likely return to
the spotlight at some point, we look for a potential period of
emerging market gains after U.S. fiscal policy risks have been
mitigated," they added.  
    Expectations that the U.S. Federal Reserve would delay the
tapering of its bond buying program into 2014 had been growing
in the past few weeks as the U.S. fiscal crisis added
uncertainty to the performance of the U.S. economy.

    Latin America FX prices at 1745 GMT: 
 Currencies                         daily %    YTD %
                                     change   change
 Brazil real                2.1608     0.83    -5.59
 Mexico peso               12.8730     0.90    -0.07
 Chile peso               495.7000     0.61    -3.43
 Colombia peso           1883.4000    -0.03    -6.23
 Peru sol                   2.7590     0.36    -7.54
 Argentina peso             5.8400     0.00   -15.88

 Argentina peso             9.7000    -1.03   -30.10
0 : 0
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