Reuters: US Dollar Report: EMERGING MARKETS-Intervention threat limits real, Mex peso choppy

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EMERGING MARKETS-Intervention threat limits real, Mex peso choppy Mar 21st 2012, 16:47 Wed Mar 21, 2012 12:47pm EDT * U.S. housing data adds to uncertainty * Brazil intervention threats limit potential currency gains * Investors worried China slowdown could hurt Latam commodity exports * Brazil real slips 0.5 pct, Mexico peso off 0.16 pct By Luciana Lopez NEW YORK, March 21 (Reuters) - Brazil's real slid early on Wednesday as government intervention threats kept investors cautious and the Mexican and Chilean pesos seesawed on U.S. data that did little to reassure markets about the recovery in the world's biggest economy. The real saw some of the largest moves among major Latin American currencies, falling 0.5 percent to bid 1.8267 per U.S. dollar. The currency has weakened as the government steps up efforts to contain its advance and help exporters. The dollar has gained about 7.7 percent since the real hit 1.6947 per dollar in February. "1.80 is the new 1.70," said Flavia Cattan-Naslausky of RBS. "The risk reward is undercut by intervention." Compounding those worries are fears China - the world's second largest economy and a major consumer of Latin American commodities such as iron ore and copper - could be slowing. From mining giant BHP Billiton saying it sees signs of "flattening" iron ore demand in China to a cut in the country's official 2012 growth target to an eight-year low, economists fear the Asian giant could be hard-pressed to keep up its role of global growth engine. "There's a big doubt around this," said Raphael Martello, an economist with Tendencias Consultoria in Sao Paulo. U.S. housing data did little to clarify the state of recovery in the world's largest economy, which is a major trading partner for Latin America. U.S. home resales unexpectedly fell in February and the supply of properties on the market rose, underscoring the many hurdles for the housing recovery. Those numbers follow a recent run of data suggesting the U.S. economic recovery was gaining momentum. Mexico's economy is particularly tied to that of its northern neighbor, sending the lion's share of its exports across the border. Latin American currencies have felt pressure from an appreciation in the U.S. dollar on signs of a stronger recovery. While U.S. jobs data have shown improvement, analysts point to persistent patches of weakness - such as the beleaguered U.S. housing market. Though short-term views remain clouded, Latin American currencies could nonetheless gain through 2012, said Alberto Bernal, head of fixed income research for Bulltick Capital Markets. Developed economies continue to pump out money, he said, pointing to the more than 1 trillion euros the European Central Bank injected in recent months through two three-year lending operations. "I expect a good portion of that money to end in Latin America," he said. The region's interest rates remain higher than in many developed nations, where policy makers slashed rates to near zero to boost flagging economies. "Those resources will continue to generate some important appreciation for the currencies." The Mexican peso dipped 0.16 percent to 12.6806 per dollar in choppy trading, whipsawing into and out of positive territory. The peso has seen rangebound trading since mid-March, unable to break key levels. Chile's peso fell 0.23 percent to bid at 485.30 per dollar, also seesawing through the session. Link this Share this Digg this Email Reprints

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