Reuters: US Dollar Report: EMERGING MARKETS-Venezuelan bonds rally on bets Chavez sick again

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EMERGING MARKETS-Venezuelan bonds rally on bets Chavez sick again Nov 27th 2012, 22:57 Tue Nov 27, 2012 5:57pm EST * Analysts speculate on new trading range for Brazil real * Mexican peso stumbles at 50-day moving average * Brazil real slips 0.12 pct, Mexico peso dips 0.14 pct By Michael O'Boyle MEXICO CITY, Nov 27 (Reuters) - Venezuelan bonds rallied on Wednesday by the most in nearly six months after President Hugo Chavez said he would return to Cuba for medical treatment, raising bets that his health has faltered. Chavez said he will travel to Cuba on Tuesday for medical treatment, following a nearly two-week absence from the public eye, months after undergoing cancer surgery on the communist-run island. If his health does worsen, his unwieldy coalition of military leaders and leftist social activists could fall apart. "This announcement is in line with our view that the president's health is deteriorating, which, despite the October presidential election result, leaves the door open for a possible political change," Barclays Capital analysts wrote. The yield on the benchmark Venezuelan global bond due September 2027 bid down 35 basis points to 10.12 percent, its biggest one-day drop since June 6. Bond yields move inversely to their prices. Latin American currencies edged weaker amid doubts about a deal to ease Greece's debt problems and as U.S. lawmakers renewed talks in tough fiscal negotiations. The Brazilian real slipped 0.12 percent to bid at 2.0793 per dollar. The currency has bounced back from a 3-1/2 year low last week after the central bank intervened in the market to halt a steep slump in the real against the dollar, and traders are wary of more intervention if the real weakens near 2.10 per dollar. But analysts also said authorities may be leaning toward allowing for a weaker currency to support exporters. Brazilian policymakers have used both verbal jawboning and market intervention to keep the real largely within a range of 2 per dollar to 2.05 since July. "Maybe the government intends to promote a slightly larger band, between 2.05 and 2.15 reais, but without abrupt movements," said Mauricio Nakahodo, an analyst the Bank of Tokyo-Mitsubishi, who said the central bank acted on Friday due to the magnitude of the loss, not a specific level. Mexico's peso lost 0.14 percent to 13.04 per dollar as it failed for a second session in a row to hold onto early gains past the psychological 13 per dollar level. A recent rally in the peso stumbled this week after the currency gained about 2 percent from a 2-1/2 month low hit earlier this month. The cost of dollars in pesos hit support at the 50-day moving average around 12.96 per dollar. Traders said the peso would need to firm past 12.95 per dollar in order for its advance against the dollar to pick up more momentum. "It will be hard to break (12.95), unless we get a big catalyst that changes the bias of markets," said Luis Rodriguez, head of analysis at brokerage Finamex in Guadalajara, Mexico. Traders said the peso would closely follow sentiment on U.S. stocks and the euro. Latin American currencies gave up early gains on Wednesday after euro zone finance ministers and the International Monetary Fund agreed to a deal that paves the way for the release of emergency aid for Greece. But investors later turned nervous about the lack of detail on a Greek bond buy-back, which has to be carried out before the IMF can release its share of aid in December. Also weighing on demand for riskier assets, U.S. Senate Majority Leader Harry Reid expressed disappointment that there has been "little progress" on dealing with the "fiscal cliff." Markets are focused on whether U.S. lawmakers can strike a deal to avoid some $600 billion in automatic spending cuts and tax increases that are due to kick in early next year and potentially tilt the U.S. economy back into recession. Latin American currencies at 2230 GMT: Currencies daily % year-to- change ate % Latest change Brazil real 2.0793 -0.12 -10.1 Mexico peso 13.04 -0.14 7.1 Argentina peso* 6.4300 0.47 -26.4 Chile peso 480.3000 0.25 8.1 Colombia peso 1,824.0000 -0.01 6.3 Peru sol 2.5840 0.15 4.4 * Argentine peso's rate between brokerages Link this Share this Digg this Email Reprints

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