Reuters: US Dollar Report: EMERGING MARKETS-Latam FX gains as markets see case for Fed stimulus

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EMERGING MARKETS-Latam FX gains as markets see case for Fed stimulus Aug 31st 2012, 16:01 Tweet Share this Email Print Related Topics Currencies » Bonds News » Bonds » Markets » Fri Aug 31, 2012 12:01pm EDT * Bernanke repeats Fed to act as needed * Some investors bet on Fed stimulus as early as in September * Brazil investors await central bank decision on swap rollover RIO DE JANEIRO, Aug 31 (Reuters) - The Brazilian real and the Mexican peso gained about 1 percent on Friday as investors interpreted remarks by U.S. Federal Reserve Chairman Ben Bernanke as leaving the door open to a third round of monetary stimulus. Most Latin American currencies initially trimmed gains as signs of imminent Fed action were not immediately apparent. After more careful consideration, however, many investors found that the case for additional stimulus remains strong. Some expect the bank to act as early as September. Bernanke said in a speech that the Fed "will provide additional policy accommodation as needed to promote a stronger economic recovery" and that the U.S. jobs market has been too slow to recover. The comments echoed those seen in the minutes of the Fed's last monetary policy meeting. "Bernanke's speech (initially) disappointed the market a bit because it came in line with what they have been saying before, that the Fed would do what was necessary when needed," said Joao Pedro Brugger, an analyst with Leme Investimentos in Florianopolis, Brazil. "Markets fell when the speech ended, but soon after hope was reignited that the Fed would come back in September with another round of monetary stimulus," he added. The Mexican peso gained nearly 1 percent to 13.2299 per dollar, after erasing all of its gains earlier. The Chilean peso was 0.2 percent stronger. The Brazilian real rose as much as 1 percent to 2.0285 per greenback. It was able to keep its gains since the beginning of the session as investors expect the central bank to not roll over some $4.5 billion in currency swaps that were originally sold to support the currency. The central bank has until the end of the session to roll over those contracts, which expire on Monday. Most analysts expect the bank will allow them to expire, effectively reducing dollar liquidity in the futures market. Brazilian policymakers have kept the real in a narrow range of 2.0 to 2.1 per dollar for two months, intervening whenever it nears either edge of that range to ensure a level that does not hurt exports or stoke inflation. Latin American FX prices at 1520 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0285 0.88 -7.89 Mexico peso 13.2299 0.98 5.59 Argentina peso* 6.3500 0.31 -25.51 Chile peso 480.0000 0.23 8.19 Colombia peso 1,826.0000 0.18 6.15 Peru sol 2.6100 0.00 3.33 * 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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