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RPT-EMERGING MARKETS-Mexico peso drops again; Brazil real flat
January 21, 2013 / 9:21 PM / 5 years ago

RPT-EMERGING MARKETS-Mexico peso drops again; Brazil real flat

* Mexico peso pressured by threat of central bank rate cut
    * Brazil real flat as U.S. holiday curbs trading volume

    By Jean Arce and Walter Brandimarte
    MEXICO CITY/RIO DE JANEIRO, Jan 21 (Reuters) - The Mexican
peso weakened for a second straight session on Monday as
investors speculated about a possible interest rate cut by the
central bank, while a U.S. holiday reduced volumes and
volatility in most Latin American foreign exchange markets.
    Mexico's peso declined 0.2 percent to 2.690 per
dollar. The peso lost 0.6 percent on Friday after a central bank
warning that interest rates could be lowered if inflation
continues to cool and the economy loses steam. 
    The peso "has been pressured a bit since the Bank of Mexico
said it could lower interest rates, if conditions permit," said
Leonardo Flores, a trader at brokerage Multivalores in Mexico
    Mexico's peso had hit a 10-month high last week
before the central bank raised the possibility of an interest
rate cut.
    By the week ending Jan. 15, bets on further gains in the
Mexican currency on the Chicago exchange rose to a record high,
with net-long contracts worth nearly 76 billion pesos ($6
    That position may have dipped after the peso's losses on
Friday, and further losses could push some of those speculators
to stop-loss levels that could quickly push the peso much
    Meanwhile, other Latin American currencies were little
changed as U.S. financial  markets were closed for a U.S. public
holiday, drastically reducing trading volumes.
    The Brazilian real  barely moved and closed at
2.0418 per dollar, within a narrow range of 2.0-2.05 per dollar
that has been favored by policymakers because it supports
exporters without adding to inflation.
    "Given still low growth, there is no incentive to revalue
(the real), and given inflation fears, no incentive to weaken it
either, at least in the near future," Marcos Buscaglia, chief
Latin America economist for Bank of America Merrill Lynch, said
during an interview with the Reuters Global Markets Forum.
    Latin American FX prices at 1900 GMT:
 Currencies                         daily %    YTD %
                                     change   change
 Brazil real                2.0418     0.05    -0.04
 Mexico peso               12.6900    -0.24     1.37
 Chile peso               472.2000    -0.15     1.38
 Colombia peso              market    n/a      n/a
 Peru sol                   2.5520    -0.04    -0.04
 Argentina peso             4.9550    -0.05    -0.86

 Argentina peso             7.4200     0.81    -8.63

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