Reuters: US Dollar Report: EMERGING MARKETS-LatAm currencies fall as China manufacturing slows

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EMERGING MARKETS-LatAm currencies fall as China manufacturing slows Mar 22nd 2012, 20:51 Thu Mar 22, 2012 4:51pm EDT * Brazil real falls to lowest since Jan. 9; intervention seen * Chile peso sheds 0.74 pct; top export copper at two-week low * Mexico peso off 0.69 pct, real ends down 0.18 pct By Caroline Stauffer RIO DE JANEIRO, March 22 (Reuters) - Latin American currencies weakened on Thursday as faltering factory activity in China cast doubt on the Asian giant's appetite for the region's commodities and surprisingly weak European data added to global growth fears. China's industrial activity fell for the fifth straight month in March, a purchasing managers index showed. In Europe, German and French manufacturing suffered sharp declines in March that even the most pessimistic economists had failed to predict, according to PMI data.. "When there's negative news out of China, Europe or the United States you have this risk-off trade," said Kathryn Rooney Vera, an emerging markets analyst at Bulltick Capital Markets. "Bad news out of China pushes Latin American currencies weaker because China is a huge commodity consumer - that's the main driver here," she said. Chile's peso shed 0.74 percent to bid 487.2 per dollar. It was the peso's weakest close in two weeks and its biggest single-day drop since March 6. Copper prices fell to a two-week low on expectations of lower demand from China, the world's biggest metals consumer, and Europe. Chile is the world's top copper exporter, and its mines produce 30 percent of the world's copper supply. Brazil's real weakened for a fourth day, losing 0.18 percent to bid 1.8207 per dollar. Declining industry performance in China, Brazil's top trading partner, led to the real's weakest close since Jan. 9. Still, Finance Minister Guido Mantega said on Thursday the central bank would continue intervening to keep the real from gaining ground as it tries to maintain the competitiveness of Brazil's already expensive exports and spur economic growth. . The central bank bought dollars on Feb. 6 for the first time since September of last year. The real has weakened 5.5 percent since it waded back into the market. "They are intervening at 1.8 to stop the real's momentum, but I have a hard time, barring a significant global situation that would impact all of Latin America, seeing it going above 1.9," said Eduardo Suarez, currency strategist at Scotia Capital. Though analysts doubt the interventions will drastically weaken the real, the efforts have led some to recommend the region's other currencies. "Mantega and (President Dilma) Rousseff have made no bones about their intention to intervene, and for that reason we aren't extremely bullish on the real. ... The Finance Ministry should not be dictating monetary policy, but that's what you see going on here," said Bulltick's Rooney Vera, who favors the Mexican peso. PESO RESPECTS MOVING AVERAGE Latin American currencies mostly 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, a government report said. Mexico, which sends nearly 80 percent of its exports to the United States, saw its currency weaken 0.69 percent, to 12.7948 on risk aversion from the Chinese and European data. But traders said the peso isn't likely to change its appreciation tendency because the Latin America's only fully convertible currency stayed below an important technical signal. "I think the key resistance is the 200-day moving average, which is 12.935," said Alfredo Puig, a trader at Vector brokerage in Monterrey. "There's been resistance at 12.85, and I think there will be at 12.90 as well." Colombia's peso strengthened 0.08 percent to 1,759.7 after the country posted 6.1 percent growth in the last quarter of 2011 versus the year-earlier period. Foreign investment and expanding consumer credit helped shield Colombia from global economic troubles. Link this Share this Digg this Email Reprints

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