Reuters: US Dollar Report: EMERGING MARKETS-Latam currencies down on rise in China inflation

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EMERGING MARKETS-Latam currencies down on rise in China inflation Jan 11th 2013, 15:07 Tweet Share this Email Print Related Topics Currencies » Bonds News » Bonds » Markets » Fri Jan 11, 2013 10:07am EST * China inflation hits 7-month high, reducing room for stimulus * Despite losses, Brazil real could test level of 2/dlr soon * Brazil real falls 0.3; Mexican peso drops 0.2 percent By Walter Brandimarte RIO DE JANEIRO, Jan 11 (Reuters) - Latin American currencies weakened on Friday as investors worried that China, the main consumer of the region's commodity exports, would have limited room to stimulate its economy due to rising inflation. Losses were limited as many analysts remain bullish on Latin American currencies, either due to expectations of a solid economic performance, as it is the case in Mexico, or due to inflation concerns such as those seen in Brazil. After a good rally so far in the year, however, some investors seemed ready to pocket part of those gains. The profit taking was triggered by data showing that China's December inflation accelerated to a seven-month high. The Mexican peso dropped 0.2 percent to 12.6320 per dollar, still holding gains of about 1.8 percent so far in the year. It had closed on Thursday near a 10-month high after data showed the country's economy accelerated in October. The Brazilian real lost 0.3 percent to 2.0345 per dollar, still up 0.3 percent since Jan. 1. As inflation in Brazil remains above the center of a government target range, investors bet the central bank will keep the real stronger than 2.05 per dollar in order to avoid pass-through to prices. Some even believe policymakers may allow the real to gain slightly past the mark of 2 per dollar -- the lower limit of a de facto trading range where the real has been confined since July. "The balance of risks has shifted towards inflation," JP Morgan's analysts said in a research note. "A persistent and broad-based weakness of the U.S. dollar could provide a cue for an eventual test of the 2 reais-per-dollar level." Latin American FX prices at 1455 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0345 -0.28 0.27 Mexico peso 12.6320 -0.21 1.84 Argentina peso* 7.2100 0.55 -5.96 Chile peso 471.6000 -0.17 1.51 Colombia peso 1,762.0000 0.06 0.23 Peru sol 2.5500 0.00 0.04 * Argentine peso's rate between brokerages Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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