December 14, 2012 / 12:40 AM / in 5 years

EMERGING MARKETS-Latam currencies edge lower as US budget talks eyed

* Brazil retail sales rise for 5th consecutive month
    * Chilean investors speculate about sovereign rating upgrade
    * Mexican peso takes biggest dip in two weeks

    By Walter Brandimarte
    RIO DE JANEIRO/MEXICO CITY 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 , Chile
 and the Colombian peso weakened 0.1 percent
or more, while the Peruvian sol was 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.
    "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 (Chilean) peso," he added.
    In Brazil, the real closed 0.43 percent weaker at 2.0742 per
    The currency has been trading close to 2.07 for four
sessions, after a series of central bank foreign exchange
interventions and comments by policymakers dragged the currency
back from a 3-1/2 year low.
    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 January 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.
    The Mexican peso closed down 0.49 percent at
12.8075 per dollar, sustaining its biggest fall in two weeks,
after U.S. Republican House Speaker John Boehner accused
President Barack Obama of "slow walking" the economy off the
fiscal cliff. 
    But analysts underscored the movement occurred a day after
the Mexican peso reached its highest level since Oct. 5,
suggesting profit-taking as opposed to broader weakening trend. 
    "The good news is that even though there is uncertainty,
even though there is no clear progress seen (on the fiscal
cliff), the exchange rate is still...fairly attractive," said
Jorge Gordillo, an analyst at CI Banco in Mexico City. He added
that he expects the peso to stay in the range of 12.70 to 12.95
per dollar in the short term.
    Latin American FX prices at 2342 GMT: 
 Currencies                            daily %  year-to-
                                        change     ate %
                              Latest              change
 Brazil real                  2.0742     -0.43    -10.30
 Mexico peso                 12.8075     -0.49      9.07
 Argentina peso*              6.5000     -0.31    -27.23
 Chile peso                 474.8000     -0.13      9.37
 Colombia peso            1,796.5000     -0.10      7.90
 Peru sol                     2.5650      0.00      5.15
 * Argentine peso's rate between                        
0 : 0
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