Reuters: US Dollar Report: EMERGING MARKETS-China, Europe PMI punish Latin American currencies

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EMERGING MARKETS-China, Europe PMI punish Latin American currencies Mar 22nd 2012, 14:53 Thu Mar 22, 2012 10:53am EDT * Brazil real weakest since cenbank started intervention * Chile peso down as top export copper falls to two-week low * Mexico peso off 0.9 pct, Brazil real down 0.43 pct By Caroline Stauffer RIO DE JANEIRO, March 22 (Reuters) - Latin American currencies weakened on Thursday as data showing faltering factory activity in China cast doubt on the Asian giant's appetite for the region's commodities amid fears the European crisis is far from over. The HSBC flash purchasing managers index (PMI), an indicator of China's industrial activity, fell for the fifth straight month to 48.1 in March, supporting the government's previous decision to cut its growth target to an eight-year low of 7.5 percent. In Europe, German and French manufacturing, which this time last year spearheaded the euro zone's economic recovery, suffered a sharp decline this March that even the most pessimistic economists failed to predict, according to PMI data. . "We had the PMI from China and then the PMI in Europe - the combination of those two is effectively hitting Latin America," said Eduardo Suarez, Currency Strategist at Scotia Capital. "The Chinese impact on commodities has transferred into the region's currencies." Chile's peso weakened 0.43 percent to 487.2 in the world's top copper export. Copper prices fell to a two-week low on expectations European and particularly Chinese demand for the red metal would fall. The South American nation produces 30 percent of the world's copper supply. Brazil's real also weakened 0.43 percent to bid 1.8248 per dollar as declining industry performance in its top trading partner, China, temporarily put aside expectations of more central bank intervention. The currency was heading towards its weakest close since Jan. 9, before the central bank waded into the market. "They are intervening at 1.8 to stop the real's momentum," said Suarez. "But I have a hard time, barring a significant global situation that would impact all of Latin America, seeing it going above 1.9." The region's currencies weakened despite signs of recovery in the United States, the world's largest economy. New U.S. claims for unemployment benefits dropped to a four-year low last week, according to a Thursday government report. Mexico, which sends 80 percent of its exports to the United States, saw its currency weaken 0.9 percent, to 12.8242 on risk aversion from the Chinese and European data. "The technical signals point to a rise to 12.86, especially if the peso closes today without showing a clear recuperation," said a report from Mexico City consultancy MetAnalisis. Link this Share this Digg this Email Reprints

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