Reuters: US Dollar Report: EMERGING MARKETS-Mexican peso gains on Fed stimulus expectations

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EMERGING MARKETS-Mexican peso gains on Fed stimulus expectations Sep 7th 2012, 22:45 Tweet Share this Email Print Fri Sep 7, 2012 6:45pm EDT * Weaker-than-expected U.S jobs data raises QE3 hopes * Mexico central bank leaves rates unchanged * Mexican peso gains 0.7 pct, Chilean peso up 0.04 pct By Gabriel Stargardter MEXICO CITY Sept 7 (Reuters) - The Mexican peso rose on Friday as below-forecast jobs data from the United States drove investors toward emerging markets and further raised the prospect of the Federal Reserve pumping additional money into the sluggish American economy. A public holiday in Brazil shuttered the week's trading in the real a day early. The Mexican peso rose 0.72 percent to 12.9760 per U.S. dollar after trading as low as 12.9413. U.S government data on Friday showed non-farm payrolls rose by a weaker-than-expected 96,000 jobs in August, setting the stage for a third round of quantitative easing, or QE, when Fed policy-makers meet next week. In the Fed's two previous rounds of easing, it pumped about $2.3 trillion into the economy to buy bonds with the aim of lowering long-term interest rates. That encouraged more investors to look for higher interest rate returns elsewhere, including in emerging markets such as Mexico. "The market now expects that the chances of the Fed coming out and throwing money at the economy, of printing more money, has improved, so the price of the dollar has fallen leading other currencies to appreciate," said Ezequiel Aguirre, a Latin American strategist at Bank of America-Merrill Lynch in New York. With the annual rate of inflation in Mexico reaching a more than two-year peak of 4.57 percent in August on the back of rising food prices, the central bank on Friday left interest rates unchanged at 4.5 percent. In contrast, regional peers Colombia and Brazil have slashed rates to record lows to stimulate growth.. The Mexican central bank aims for annual inflation of 3 percent, plus or minus 1 percentage point. "With inflation well above target and core steadily going up, I think there'll be resistance from some members of the board to consider a cut at this point," said Rafael de la Fuente, an economist at UBS. "And a hike (in interest rates) I don't think is warranted given that most of the price pressures are supply shock driven." The Chilean peso jumped 0.04 percent to 475.70 per dollar, despite news that Chile's yawning trade deficit has grown to its largest levels - $843 million - since October 2008. Latin American FX prices at 2220 GMT: Currencies daily % YTD % change change Latest Brazil real Holiday Mexico peso 12.9760 0.72 7.66 Argentina peso* 6.3100 0.48 -25.04 Chile peso 475.7000 0.04 9.17 Colombia peso 1,800.8000 -0.03 7.64 Peru sol 2.6080 0.00 3.41 * 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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