Reuters: US Dollar Report: EMERGING MARKETS-Brazil real gains past 2/dlr, Mexico peso falls

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EMERGING MARKETS-Brazil real gains past 2/dlr, Mexico peso falls Jul 2nd 2012, 15:58 Tweet Share this Email Print Mon Jul 2, 2012 11:58am EDT * Brazil real gains on expectation of more cenbank action * US data, fading Pena Nieto optimism weigh on Mexican peso By Natalia Cacioli RIO DE JANEIRO, July 2 (Reuters) - The Brazilian real on Monday strengthened past the level of 2 per dollar for the first time in over one month on expectations of additional central bank intervention, while the Mexican peso fell after unexpectedly weak U.S. manufacturing data. The real gained 1.0 percent to 1.9897 per dollar as investors took Brazil's strong currency interventions last week as a sign that policymakers will not allow the exchange rate to depreciate much further. Brazil's central bank last week eased rules on export prepayment and sold 180,000 currency swaps worth $9 billion in three auctions. While the first measure allows more dollars to flow into the country, the swap auction boosts the supply of greenbacks in the futures market. "The market today is reflecting what happened last week: the central bank intervened heavily with those three auctions, and that calmed markets down," said Joao Medeiros, a director at Pioneer brokerage in Sao Paulo. Medeiros added that the level of 1.9 reais per dollar could become the new ceiling for the currency if Europe's financial situation does not deteriorate further. In Mexico, however, the peso weakened 0.6 percent after economic data in the neighboring United States showed the manufacturing sector unexpectedly contracted in June, weighing on prospects for the Mexican economy. The United States accounts for most of Mexico's exports. The peso had been little changed early in the session after presidential front runner Enrique Pena Nieto claimed victory in Sunday's elections, as analysts said the recent optimism with the reforms he has pledged to carry on could vanish soon. "There are perhaps some early indications that the (election) result may fail to fully meet the market's greatest expectations," David Rees, emerging markets economist with London-based Capital Economics, wrote in a research note. He mentioned concerns that Pena Nieto's coalition could fall short of securing a majority in Congress when the full results of the elections are announced on Wednesday. "At best that could cause reforms to be watered down, at worst it could lead to a continuation of the political deadlock that has stalled reform during the PAN's twelve-year stint in the presidency," Rees added, referring to the political party of outgoing president Felipe Calderon. Latin American FX prices from Reuters at 1540 GMT Currencies daily % YTD % change change Latest Brazil real 1.9897 0.97 -6.09 Mexico peso 13.3900 -0.26 4.33 Argentina peso* 5.9100 0.68 -19.97 Chile peso 500.0000 1.86 3.86 Colombia peso national 0.0 8.67 holiday Peru sol 2.6510 0.49 1.74 * Argentine peso's rate between brokerages Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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