Reuters: US Dollar Report: EMERGING MARKETS-Latam FX up on talk of Spain banks rescue

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EMERGING MARKETS-Latam FX up on talk of Spain banks rescue Jun 6th 2012, 19:37 Wed Jun 6, 2012 3:37pm EDT * Germany, EU exploring ways to save Spanish banks - sources * Brazil real flat one day after central bank-led rally * Currencies of Mexico, Colombia up more than 0.5 pct * Chilean peso rallies 1.5 pct as copper prices rise By Walter Brandimarte RIO DE JANEIRO, June 6 (Reuters) - Latin American currencies rose on Wednesday on hopes European officials would soon come up with a plan to rescue Spain's banks, but Brazil's real weakened as investors feared possible negative developments in external markets ahead of a national holiday. Mexico's and Colombia's currencies gained more than half a percentage point on reports Germany and European Union officials were urgently exploring ways to recapitalize Spanish banks. The Chilean peso closed at a two-week high, also boosted by higher commodity prices. "The initial stabilization in external risk appetite suggests a recovery across those assets with stronger technicals and fundamentals," Siobhan Morden, head of Latin America strategy at Jefferies & Co, said in a research note, citing an expected recovery in the Mexican peso. Fears the euro zone debt crisis could further escalate and hurt Latin American exports to Europe have weighed on those currencies in the past few weeks, driving the Mexican peso to a three-year low of around 14.6009 per dollar earlier in the month. The Mexican peso traded at 14.082 per dollar, 0.97 percent higher on the day. Risk aversion also contributed to the currency selloff as investors have been withdrawing cash from Latin American bond and stock funds. In May, Brazil recorded dollar outflows of $1.511 billion, according to central bank data. But a recovery in commodity prices supported the currencies of major metal exporters such as Chile. "The (Chilean) peso is gaining in line with external markets. Copper prices are rising and that boosts demand for the Chilean currency," said Sergio Tricio, head of research at Forex Chile. "We anticipate a short-term strengthening trend, with the peso nearing 506 per dollar." The Chilean peso closed at 506.40 per greenback, 1.15 percent higher from the previous session, as U.S. copper prices soared 2.7 percent. BRAZIL'S REAL DROPS The Brazilian real weakened 0.7 percent to 2.031 per dollar, however, before a national holiday on Thursday. "Nobody wants to be caught with currency exposure during the holiday," said Marcos Trabbold, a currency trader with B&T brokerage in Sao Paulo, referring to lingering concerns over the European debt crisis. The real had jumped more than 1 percent on Tuesday as the central bank intervened in the market for the first time in more than a week, auctioning currency swap contracts that have a market impact similar to the sale of dollars in the futures market. The intervention reinforced investors' perception the central bank was drawing an informal line around 2.05 reais per dollar. Latin America FX prices from Reuters at 1917 GMT: Currencies daily yearly pct pct Latest change change Brazil real 2.0310 -0.71 -8.00 Mexico peso 14.0814 0.97 -0.79 Argentina peso* 5.9300 -0.17 -20.24 Chile peso 506.4000 1.15 2.55 Colombia peso 1,781.4400 0.59 8.81 Peru sol 2.6850 0.34 0.45 * Argentina peso's rate between brokerages Link this Share this Digg this Email Reprints

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