Reuters: US Dollar Report: EMERGING MARKETS-Latam FX up on stimulus bets, real falls

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EMERGING MARKETS-Latam FX up on stimulus bets, real falls Jul 3rd 2012, 17:54 Tweet Share this Email Print Tue Jul 3, 2012 1:54pm EDT * Commodities rally on bets ECB will cut rates to record low * Brazil cenbank always considering dollar buys-director * Brazil real drops 0.5 pct, Mexican peso up 0.2 pct By Natalia Cacioli SAO PAULO, July 3 (Reuters) - Most Latin American currencies gained on Tuesday on bets European policymakers would deploy new stimulus measures that could translate into additional foreign-currency inflows to the region. Chances the European Central Bank will cut interest rates to a new record low on Thursday and take extra measures to boost growth spurred a broad rally in emerging market assets. The Brazilian real was an exception. It erased early gains to slide about half a percentage point after a central bank director said policymakers are constantly considering the purchase of dollars on the spot market to mop up excess liquidity. Such moves tend to weaken the real. The Chilean and Colombian pesos led gains among Latin American currencies, boosted by a rally in commodities. Chile's peso jumped 1.2 percent as the price of copper, the country's main export, hit a seven-week high. The Colombian peso was 0.9 percent higher. The Mexican peso rose a more modest 0.2 percent, however, as trading volumes thinned ahead of the U.S. Independence Day holiday. In Brazil, Aldo Mendes, the central bank's director of monetary policy, told local news agency Agencia Estado that disappointing industrial production figures in Brazil make it more likely the government will seek a weaker real to boost exports. He added that, in his personal view, a real weaker than 2 per dollar "may not be good for the industrial sector." The real , which had strengthened to as much as 1.9783 per U.S. dollar earlier in the session, erased all its gains right after Mendes' comments. It last traded at 1.9958, just a tad shy of the 2-per-dollar threshold. "To say that the central bank may intervene buying dollars and not only selling (currency swaps) caused the market to immediately turn around," said Italo dos Santos from Icap brokerage. The central bank last purchased dollars on the spot market at the end of April, when the real was trading below 1.90. As the currency weakened past the level of 2 per dollar in May, the central bank started selling currency swaps, which essentially boost the supply of dollars in the futures market. Latin American FX prices from Reuters at 1707 GMT Currencies daily % YTD % change change Latest Brazil real 1.9960 -0.48 -6.39 Mexico peso 13.3025 0.21 5.01 Argentina peso* 5.9500 0.17 -20.50 Chile peso 494.7500 1.24 4.96 Colombia peso 1,768.1500 0.88 9.63 Peru sol 2.6430 0.34 2.04 * 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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