Reuters: US Dollar Report: EMERGING MARKETS-Latam FX gains on ECB talk, US stimulus hopes

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EMERGING MARKETS-Latam FX gains on ECB talk, US stimulus hopes Jul 25th 2012, 21:46 Tweet Share this Email Print Wed Jul 25, 2012 5:46pm EDT * Brazil central banker signals willingness to intervene * Brazil real firms 0.34 pct, Mexico peso up 0.78 pct By Rachel Uranga and Natalia Cacioli MEXICO CITY/SAO PAULO, July 25 (Reuters) - Latin American currencies gained on Wednesday, halting a three-day slide, as investors speculate that the U.S. Federal Reserve may soon deploy additional monetary stimulus and hopes rose Europe could stem the region's debt crisis. The Brazilian real firmed by 0.34 percent and the Mexican peso strengthened 0.78 percent. Meanwhile, the Chilean peso was 0.65 percent higher. A European Central Bank policymaker said on Wednesday he was open to the idea of giving Europe's new permanent rescue fund a banking license, which would enable it to borrow unlimited central bank money and boost its capacity to fight the crisis. "Anything that increases the ability to purchase sovereign debt and extend the timeframe to which some euro zone countries may need to lower their debt levels and boost growth is seen as a positive development," said Clyde Wardle, a Latin American currency strategist at HSBC in New York. "But all of this is all based on comments rather than firm decisions." The currencies of Brazil, Mexico and Chile all posted losses in the past three sessions as concerns were heightened that Spain could need a full-fledged bailout. In the days ahead, Wardle said a jump in yields in Spain and Italy could weaken the Mexican peso, one of the most widely traded currencies and highly sensitive to global economic sentiment. Meanwhile, signs of a gloomy global economy limited gains in higher-risk assets. Weak readings on Britain's gross domestic product, falling U.S. new home sales and a German business sentiment survey all added to worries about the global economic outlook. In Brazil, market players remained concerned the government would meddle in currency markets if the real moves outside of the central bank's comfort zone in the range between 2.00 and 2.10 per dollar. Central bank governor Alexandre Tombini on Tuesday reiterated the bank is ready to intervene into local currency markets when they are "not working properly." Riskier assets, including emerging market currencies, got a lift from a report in The Wall Street Journal on Tuesday saying the Federal Reserve may be moving closer to more stimulus that would aid the economy. The Fed's past bond buying programs have driven down yields on U.S. Treasury debt and pushed investors to seek out higher yields in riskier assets. "Expectations that the Fed may move up its third round of stimulus to August encouraged investors," said Luciano Rostagno, chief strategist at WestLB bank in Sao Paulo. Latin American FX prices at 2050 GMT: Currencies daily pct yearly Latest change pct change Brazil real 2.0363 0.34 -8.11 Mexico peso 13.6010 0.78 2.71 Argentina peso* 6.4100 0.31 -26.21 Chile peso 491.5000 0.65 5.66 Peru sol 2.6370 0.15 2.28 * Argentina 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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