Reuters: US Dollar Report: EMERGING MARKETS-Brazil rate futures drop on central bank minutes

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EMERGING MARKETS-Brazil rate futures drop on central bank minutes Jun 8th 2012, 13:36 Fri Jun 8, 2012 9:36am EDT * Brazil cenbank says global downturn sapping inflation * Latam currencies fall on global economic concerns * Chile's peso slumps with copper prices, muted inflation * Brazil real 0.5 pct lower, Mexico peso drops 0.1 pct RIO DE JANEIRO, June 8 (Reuters) - Brazil's interest-rate futures slid on Friday after the central bank suggested it is poised to keep cutting the country's base interest rate, while Latin American currencies weakened on lingering global economic concerns. Brazil's interest-rate contracts maturing in January 2013 dropped 7 basis points to 7.820 percent after the central bank said in minutes of its latest monetary policy meeting that a global economic downturn is helping to bring inflation back to target. The bank's committee, know as the Copom, repeated its guidance that more rate cuts should be conducted "sparingly." Policymakers unanimously cut the benchmark Selic rate for a seventh consecutive time to a record low of 8.5 percent on May 30. "This leaves the door open for additional rate cuts," said Alberto Ramos, a senior economist with Goldman Sachs, adding that the next cuts should be "moderate," or smaller than 75 basis points, and "somewhat data dependent." Goldman Sachs expects Brazil will cut the Selic again to 8.0 percent in July. "An extension of the easing cycle beyond the July meeting is certainly possible particularly if the external backdrop continues to deteriorate and the domestic real business cycle dynamics remain sluggish," Ramos said. Concerns about the impact of an escalating European debt crisis on the global economy weighed on Latin American currencies, however, one day after a surprise interest rate cut by China triggered a rally in emerging markets in general. Brazil's real and Mexico's peso weakened around 0.5 percent and 0.1 percent, respectively, as investors cautiously watched developments in the euro zone. Spain is expected to request European aid for its struggling banks during the weekend, becoming the fourth and biggest European country to seek assistance since the euro zone's debt crisis began. Chile's peso lost more than 1 percent to a three-week low of 506.40 per dollar as prices of copper, the country's main export product, fell to a six-month low in London. "Markets are all in the red, with stocks falling, copper prices tumbling and the dollar strengthening against the euro - all those factors are negative for the peso," said a trader in Santiago. Chile's lower-than-expected inflation reading for May also contributed to a weaker peso as it eliminated any speculation of an immediate rate hike by the central bank. Chile's consumer price index was unchanged in May from the previous month, the government statistics agency INE said. Analysts polled by Reuters had forecast a median 0.2 percent increase for the index. Latin American FX prices from Reuters at 1307 GMT: Currencies daily % yearly % change change Latest Brazil real 2.0362 -0.48 -8.24 Mexico peso 14.0900 -0.17 -0.86 Argentina peso* 5.9300 -0.17 -20.24 Chile peso 504.8500 -0.88 2.86 Colombia peso 1,777.5500 -0.33 9.05 Peru sol 2.6810 0.15 0.60 * Argentine peso's rate between brokerages Link this Share this Digg this Email Reprints

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