Reuters: US Dollar Report: EMERGING MARKETS-Argentine debt rallies; Brazil real slumps

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EMERGING MARKETS-Argentine debt rallies; Brazil real slumps Nov 29th 2012, 22:09 Thu Nov 29, 2012 5:09pm EST * Optimism on U.S. budget deal aids most Latam currencies * Dollar-long players seek weaker month-end Brazil real rate * Real weakens 0.33 pct, Mexican peso gains 0.24 pct By Jorge Otaola BUENOS AIRES, Nov 29 (Reuters) - Argentine bonds rallied on Thursday after the country won a reprieve from a U.S. appeals court that eased investors' fears of a new default as early as next month. Argentine debt prices had tumbled since a U.S. court ruled last week that the country must pay $1.33 billion by Dec. 15 to "holdout" investors who rejected a previous restructuring of its defaulted debt. The South American nation had rejected paying the investors, who had filed the lawsuit, raising the risk of a technical default on about $24 billion worth of debt since Argentina was going to be barred from trying to only pay investors who had taken part in two debt exchanges in 2005 and 2010. But an appeals court on Wednesday gave Argentina more time to fight last week's ruling by U.S. District Judge Thomas Griesa. "For a few days at least, happiness is back," said Sabrina Corujo and analyst at consultancy Portfolio Personal. After slumping nearly 30 percent since late October, the price on Argentina's June 2017 global bond jumped almost 14 percent on Thursday. In currency trading, the Brazilian real extended its losses for a second day on Thursday, under pressure by dollar-heavy investors who wanted to weaken the currency as the central bank on Friday set a monthly exchange reference rate. The real bid down 0.33 percent to 2.0963 per dollar, recovering from a drop of around 1 percent. "The only thing that justifies this currency move is the fight over the Ptax," said Mario Battistel, manager of the currency trading desk at Fair brokerage in Sao Paulo. The Ptax is a benchmark exchange rate for a broad range of contracts, including foreign loans, trade, and derivatives. Dollar-laden speculators may have tried to keep the real weak through the Ptax fix, traders said. A higher Ptax means it costs more reais to buy dollars. The real pared steeper losses as investors feared that Brazil's central bank could intervene again if the currency continued to slide. Last Friday, as the real traded at a 3-1/2 year low of around 2.11 per dollar, the central bank called an auction of traditional currency swaps, derivative contracts that emulate the sale of dollars in the futures market. Brazilian policymakers have used both verbal and market intervention to keep the real largely within a range of 2 per dollar to 2.05 since July. But other analysts said authorities may be leaning toward allowing for a weaker currency to support exporters, and they may allow the real to drift lower, as long as the drop does not happen with too much velocity. Elsewhere in Latin America, currencies gained along with emerging market stocks. Boosting investors' appetite for risk was optimism that U.S. leaders could reach a deal to avert steep spending cuts and tax hikes that could plunge the world's largest economy in recession next year. "In the United States, they say there are growing chances of an agreement to avoid the fiscal cliff and that is bring optimism to the market," said Gloria Soto, a currency trader at FXCM Chile. The Mexican peso firmed 0.24 percent and the Chilean peso gained 0.33 percent. Latin American currencies at 2140 GMT: Currencies daily year-to-d % te % Latest change change Brazil real 2.0963 -0.33 -10.9 Mexico peso 12.9381 0.24 8.0 Argentina peso* 6.4200 0.78 -26.3 Chile peso 479.0000 0.33 8.4 Colombia peso 1,815.1000 0.45 6.8 Peru sol 2.5760 0.35 4.7 * Argentine peso's rate between brokerages Link this Share this Digg this Email Reprints

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