Reuters: US Dollar Report: EMERGING MARKETS-Latam currencies soar on EU deal, cenbank boosts real

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EMERGING MARKETS-Latam currencies soar on EU deal, cenbank boosts real Jun 29th 2012, 22:48 Fri Jun 29, 2012 6:48pm EDT * Eurozone measures reduce Spain, Italy borrowing costs * Brazil eases restrictions on funding for export prepayment * Brazil real jumps 3.3 pct, Mexico peso up 1.9 pct By Walter Brandimarte RIO DE JANEIRO, June 29 (Reuters) - Latin American currencies rallied on Friday as investors welcomed an euro zone agreement to recapitalize its banks, while a move by the Brazilian government to facilitate dollar inflows further boosted the real. The Brazilian currency soared 3.3 percent to close at 2.009 per dollar, after the central bank eased rules on export prepayment and sold 60,000 currency swaps in an auction. While the first measure allows more dollars to flow into the country, the swap auction boosts the supply of greenbacks in the futures market. With Friday's rally, the real erased almost all of its losses for June. Still, it remains about 7 percent lower in the year to date. The export prepayment measure was announced late on Thursday when the real weakened to near 2.1 per dollar, leading many investors to believe the central bank was drawing a strong line around that level. "I believe the central bank is now comfortable with the real at 2.0, or even at 2.05 per dollar," said Jose Carlos Amado, a currency trader with Renascenca brokerage in Sao Paulo. He said the central bank might halt the sale of currency swaps for now, if the real remains at that level. Other Latin American currencies also posted strong gains after EU leaders agreed on Friday to let their rescue fund inject aid directly into their banks, as well as to intervene on bond markets to support troubled member states. The Chilean peso closed at a bid price of 500.90, rising 1.7 percent from Thursday, its largest one-day jump in seven months. The Mexican peso gained 1.9 percent to 13.355 per dollar, its strongest level since the beginning of May. It rallied some 7.7 percent in June, the largest monthly jump since Reuters started recording that data late in 1997, also boosted by expectations this weekend's presidential and parliamentary elections could pave the way for economic reforms. The measures in Europe were a positive surprise for investors who had very low hopes about the ability of euro-zone leaders to agree on a way out of the crisis. "Expectations for the EU summit were very negative, markets believed there would be no agreement," said Delia Paredes, director of analysis and strategy at Banorte-IXE in Mexico City, explaining why the peso rallied sharply after news of an euro-zone agreement. "Of course the devil is on the details on how they're going to implement that," she added, noting that a series of economic data in the United States could also sap the peso's strength next week. Latin American FX prices from Reuters at 2230 GMT: Currencies daily % year-to- change ate % Latest change Brazil real 2.0098 3.30 -7.02 Mexico peso 13.3550 1.90 4.60 Argentina peso* 5.9300 0.84 -20.24 Chile peso 500.9000 1.68 3.67 Colombia peso 1,783.7000 1.31 8.67 Peru sol 2.6640 0.08 1.24 * Argentine peso's rate between brokerages Link this Share this Digg this Email Reprints

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