Reuters: US Dollar Report: EMERGING MARKETS-Latam currencies rebound from Friday sell-off

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EMERGING MARKETS-Latam currencies rebound from Friday sell-off Jun 4th 2012, 15:39 Mon Jun 4, 2012 11:39am EDT * Paris backs use of bailout fund to support European banks * Latam FX supported by expectation of cenbank intervention * Brazil real 0.3 pct stronger, Mexico peso 0.5 pct higher By Walter Brandimarte RIO DE JANEIRO, June 4 (Reuters) - Latin American currencies gained o n M onday as yields paid by peripheral European countries steadied after Friday's sell-off, giving a breather to investors worried about a possible break-up of the euro zone. Investors, looking for any sign of fiscal integration in the euro zone, particularly welcomed comments from French Finance Minister Pierre Moscovici that Paris backed the idea of using the euro zone's ESM bailout fund to recapitalize struggling banks in the region. Expectations that the region's central banks could step up intervention in the foreign exchange market to curb any sharp price move also supported Latin American currencies. "Markets overseas are a little better, and that is driving the dollar lower" against most currencies, said Flavio Serrano, chief economist with BES Investimento in Sao Paulo. The Brazilian real , which had slumped around 1.5 percent o n F riday, traded 0.4 percent stronger at 2.0391 per dollar. Serrano said the level of 2.05 reais per dollar became an informal floor for the currency after the Brazilian central bank stepped up its market intervention when the real weakened past that level. The Mexican peso also gained about half a percentage point to 14,25 per dollar as investors considered that the currency, which has lost about 12 percent since a March high, has sold off excessively. "We estimate that the Mexican peso is currently approximately 12 percent cheap to fundamental fair-value against the U.S. dollar anchor currency," Alberto Ramos, an economist with Goldman Sachs, wrote in a note to clients. "However, we reckon that despite fundamental and valuation attractiveness, the Mexican peso is still vulnerable to further deterioration of global market sentiment due in part to the peculiarities of the peso market - deep, deliverable, and open 24 hours/day." Most Latin American currencies slumped on Friday as disappointing economic data in the United States, China and Brazil fueled concerns about the sustainability of the global economic recovery. Link this Share this Digg this Email Reprints

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