August 3, 2011 / 5:45 PM / in 6 years

EMERGING MARKETS-Latam currencies mixed as U.S. growth sluggish

* High Latam returns check sluggish U.S. growth concern

* Mexico‘S and Chile’s pesos weaken, Brazil’s real gains

* Mexico and Brazil 10-year bond yields fall

By Jeb Blount

RIO DE JANEIRO, Aug 3 (Reuters) - Latin American currencies traded mixed against the U.S. dollar on Wednesday as the region’s relatively high returns checked concern that sluggish U.S. growth and European debt will harm the world economy.

The pace of U.S. service industry growth USOPMI=ECI slipped to its lowest level in 17 months in July, according to the Institute for Supply Management, while the Commerce Department said factory orders USFORD=ECI fell 0.8 percent in June after rising in May.


In addition, the ADP National Employment Report USADP=ECI said 114,000 jobs were created by U.S. non-government employers in July, 27 percent less than in June. For more see: [ID:nN1E77208M]

“While the market is coming to terms with the weakness we’ve seen in the U.S., there remain attractive investment opportunities in the region.” said Clyde Wardle, an economist with HSBC in New York. “That’s why you’re seeing such weakness in regional stocks while local bonds in places like Mexico are holding up.”

Mexican bond yields fell in trading on Wednesday, a sign that demand for Mexican, peso-denominated government debt is rising. Bond prices rise and yields fall when demand for debt rises.

The yield on a Mexican government treasury bond maturing in 10 years MX10YT=RR fell 15 basis points to 6.23 percent. Similar U.S. Treasuries yield 2.59 percent.

Mexico's peso MXN=D2 weakened 0.1 percent to 11.8430 to the dollar. Mexico gets about 80 percent of its export earnings from the United States.

“As the peso has slipped in recent weeks it has made it cheaper for investors with dollars to buy Mexican bonds, whose yields are high,” Wardel said. “The demand for fixed income has helped offset worries about the impact of a sluggish U.S. on Mexico.”

Brazil’s real BRBY gained 0.2 percent to 1.5640 after opening stronger, weakening and then reversing losses.

Brazil’s bond returns are even higher than those in Mexico, even with the latest decline. Brazilian 10-year local-currency Treasury debt BR10YT=RR slipped 8 basis points to 12.47 percent, a sign that demand for the debt is strong.

The real also gained because after two days of declines against the dollar, the exchange rate is now more favorable for exporters. That prompts them to bring home dollars earned from record exports of iron ore, sugar and other commodities, reversing the real’s slide, said Jankiel Santos, chief economist at BES Investment Bank in Sao Paulo.

Chile's peso CLP=CL slipped 0.3 percent to 460.1O.

Copper CMCU3, responsible for about a third of Chilean exports, fell 1.6 percent to $9,526 a tonne in London, its second-largest intraday decline in little more than two months.

Argentina's peso ARS=RASL was little changed from Tuesday at 4.1500, Colombia's peso COP2=STFX was little changed at 1,772.45 and Peru's peso PEN=PE was unchanged from Tuesday at 2.7420. (Editing by Dan Grebler)

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