Reuters: US Dollar Report: EMERGING MARKETS-Mexico peso leads Latam currencies lower on Spain fears

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EMERGING MARKETS-Mexico peso leads Latam currencies lower on Spain fears Jul 24th 2012, 18:15 Tweet Share this Email Print Related Topics Currencies » Bonds News » Bonds » Markets » Tue Jul 24, 2012 2:15pm EDT * Spain pays 2nd highest yield to sell short-term debt * Brazil seen rolling over maturing currency swaps * Mexico peso down 1.1 percent, Brazil real falls 0.3 percent By Natalia Cacioli SAO PAULO, July 24 (Reuters) - The Mexican peso led Latin American currencies lower on Tuesday as persisting fears of a Spanish bailout drove investors out of emerging markets for a third consecutive session. The Mexican peso slid 1.1 percent, one day after sharp currency losses forced the Mexican central bank to sell dollars at an auction. The bank intervenes in the market whenever the peso weakens more than 2 percent from the previous session's fix price. The Brazilian real was little changed during the first part of the session but dropped 0.3 percent in the afternoon, as U.S. stock markets added to losses. "We're focused on what is happening out there. And the situation is getting more and more critical," said Joao Medeiros, a director at Pioneer brokerage in Sao Paulo. Expectations Spain would need a full bailout that would further stretch the euro zone's finances grew further after Madrid paid its second highest yield to issue short-term debt since the introduction of the euro. The Brazilian real has lost nearly 2 percent since Thursday's close as tensions in the euro zone rose, but investors have been wary of weakening the currency too much as they fear the central bank could intervene in the market to support it. The bank last month sold large amounts of currency swaps, which essentially increase the supply of dollars in the futures market, whenever the real weakened to near 2.10 per dollar. The currency last traded at 2.0458 per greenback. Analysts now expect the central bank to roll over in the next few days currency swaps worth $4.6 billion that expire on Aug. 1. "The expectation is that the central bank will roll over all the contracts, as it is reasonable to believe it doesn't want market liquidity to shrink right now," said Darwin Dib, chief economist at CM Capital Markets in Sao Paulo. Latin American FX prices at 1800 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0458 -0.26 -8.67 Mexico peso 13.7367 -1.08 1.69 Argentina peso* 6.3800 0.63 -25.86 Chile peso 494.7000 -0.51 4.97 Colombia peso 1,803.1000 -0.78 7.50 Peru sol 2.6400 -0.27 2.16 * Argentine peso's rate between brokerages Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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