Reuters: US Dollar Report: EMERGING MARKETS-Latam currencies firm on US factory data

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EMERGING MARKETS-Latam currencies firm on US factory data Oct 1st 2012, 22:28 Tweet Share this Email Print Mon Oct 1, 2012 6:28pm EDT * US manufacturing sector expands for 1st time since May * Central bank intervention fears curb FX gains in Brazil * Mexican peso up 0.2 pct, Brazilian real nearly flat By Jean Arce MEXICO CITY, Oct 1 (Reuters) - Latin American currencies gained on Monday after a surprise expansion in the U.S. manufacturing sector eased concerns about a global slowdown. The Mexican peso firmed 0.2 percent to 12.84 per U.S. dollar after data showed the manufacturing sector of the United States, Mexico's main trading partner, expanded in September for the first time since May. "This scenario is positive for manufacturing activity, which obviously has an impact in the local market," said Mario Copca, an analyst at brokerage CI in Mexico City. Mexican factories tend to closely track activity in the United States. An index of manufacturing activity in Mexico slowed for a third month in a row in September, but still pointed to further expansion ahead. Investors have been revising their estimates for stronger Latin American currencies as more dollars are expected to flow into emerging markets as a result of government and central bank efforts to stimulate growth. Analysts now expect the peso to finish 2012 at 12.88 per dollar, stronger than the level of 13.01 forecast a month ago, a survey by the Mexican central bank with private analysts showed. Federal Reserve Chairman Ben Bernanke on Monday defended the U.S. central bank's controversial bond-buying stimulus plan. Brazilian policymakers have complained that easy monetary policies in the United States are pushing speculators to buy up emerging market assets, strengthening local currencies and undermining the competitiveness of domestic manufacturers. The Brazilian real bid a slight 0.05 percent firmer at 2.0254 per dollar on the local market close. Investors have been avoiding making strong bets on a stronger real currency for fear of central bank intervention. Brazilian policymakers have managed to keep the real weaker than 2 per dollar -- a level they consider beneficial to exporters -- since early July. "Here the concern is that the central bank will step into the market if the dollar weakens too much. For now, nobody is willing to fight the central bank," said Mario Battistel, head of the currency desk at Fair Corretora, a brokerage in Sao Paulo. In Chile, the peso gained 0.4 percent, recovering part of the losses seen on Friday, when threats of government intervention caused the currency to slump the most in seven weeks. Fears of intervention in Chile have grown after central bank chief Rodrigo Vergara said policymakers may intervene during "exceptional periods" in which the exchange rate is significantly out of line with fundamentals. The move by Chile pushed it closer to the stance of policymakers in Brazil, Colombia and Peru who have been intervening in markets to fight dollar inflows. Latin American FX prices at 2200 GMT: Currencies daily % year-to- change ate % Latest change Brazil real 2.0260 0.02 -7.77 Mexico peso 12.8400 0.20 8.80 Argentina peso* 6.2400 0.96 -24.20 Chile peso 472.6000 0.42 9.88 Colombia peso 1,800.1900 0.01 7.68 Peru sol 2.5980 -0.08 3.81 * 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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