Reuters: US Dollar Report: EMERGING MARKETS-Mexico peso gains on US fiscal hopes; real down

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EMERGING MARKETS-Mexico peso gains on US fiscal hopes; real down Nov 28th 2012, 20:22 Tweet Share this Email Print Wed Nov 28, 2012 3:22pm EST By Danielle Fonseca and Jean Arce SAO PAULO/MEXICO CITY, Nov 28 (Reuters) - Latin American currencies were flat to stronger on Wednesday on optimism over U.S. fiscal cliff negotiations, but the Brazilian real slid as investors tested the central bank's tolerance to a weaker currency. The Mexican peso gained 0.4 percent to 12.9920 per dollar, and looked set to hold past the level of 13 per dollar for the first in three sessions. It erased early losses after a top Republican voiced optimism that his party could broker a deal with the White House to avoid harsh spending cuts and tax hikes that are set to kick in next year, potentially driving the world's largest economy into recession. Most Latin American currencies trimmed losses after the comments by U.S. House Speaker John Boehner, and after President Barack Obama said he hoped an agreement could be reached before Christmas. "Above all, the comments made by U.S. lawmakers bolstered currency markets, especially the Mexican peso which is extremely linked to the U.S. fiscal cliff discussions," said Ezequiel Aguirre, a strategist with Bank of America Merrill Lynch in New York. The Brazilian real weakened 0.4 percent to 2.0893 per dollar, however, as investors wondered if the central bank would intervene again if the currency continued to approach the level of 2.1 per dollar. Last Friday, as the real traded around 2.11 per dollar, the central band called an auction of traditional currency swaps, derivative contracts that emulate the sale of dollars in the futures market. The bank sold about half of the 62,800 swaps offered at the auction, partly cancelling some reverse swaps that are due to expire early next month, and raising questions whether it would offer the other half in the next few days. Traders said some investors were also weakening the exchange rate to push for a more favorable month-end Ptax rate -- an average dollar-real rate which is used to settle everything from export payments to foreign loans. "It's very likely for the market to push the dollar higher (against the real) in the next few days as we start to have that fight over the Ptax. I see chances of a weaker real in the next few days," said Marcos Trabbold, a currency trader at B&T brokerage in Sao Paulo. Latin American currencies at 2005 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0893 -0.4 -10.73 Mexico peso 12.9896 0.39 7.54 Argentina peso* 6.4500 0.00 -26.67 Chile peso 480.6000 -0.06 8.05 Colombia peso 1,823.3500 0.04 6.31 Peru sol 2.5850 0.04 4.33 * 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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