Reuters: US Dollar Report: RPT-EMERGING MARKETS-Latam currencies drop on Fed stimulus concern

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RPT-EMERGING MARKETS-Latam currencies drop on Fed stimulus concern May 10th 2013, 21:39 Tweet Share this Email Print Related Topics Currencies » Bonds News » Bonds » Markets » Fri May 10, 2013 5:39pm EDT * Fears of smaller Fed stimulus roil Latam markets for 2nd day * Mexico's weak industrial output, central bank minutes weigh on peso * Mexico peso drops 0.7 pct, Brazil real falls 0.4 pct By Walter Brandimarte RIO DE JANEIRO, May 10 (Reuters) - Latin American currencies weakened for a second day on Friday as concern that the U.S. Federal Reserve could scale back its stimulus program weighed on risk assets, boosting investors' appetite for the dollar instead. Mexico's peso led losses in the region after weak industrial production data for March and central bank minutes that highlighted risks to growth fueled expectations of further interest rate cuts in Latin America's second-largest economy. The peso dropped 0.9 percent and returned to the level of 12 per dollar as some investors feared that lower interest rates could reduce the appeal of Mexican assets to foreign investors. Just two days ago, the Mexican currency had strengthened past the 12-per-dollar mark for the first time in 21 months. Brazil's real weakened 0.4 percent to 2.0238, nearing a level that, according to analysts, could trigger a central bank intervention. Comments by Esther George, head of the Kansas City Fed, that she hoped the central bank would be able to reduce the stimulus fueled concerns about the future of the Federal Reserve's bond-buying program. "There were some comments from a Fed official and the market saw the possibility of less stimulus," said Jose Carlos Amado, a trader with Renascenca brokerage in Sao Paulo. "The market had been very quiet and took that as an excuse to move prices." Despite such concerns, other analysts noted that Japan's unprecedented monetary stimulus should continue to support the appetite for emerging market assets for many months to come. "Even if the U.S. was to unwind its monetary stimulus, Japan will still be a force to reckon with. Japan is doing a very aggressive monetary stimulus and they could do more," said Kathryn Rooney Vera, Latin America strategist with Miami-based BullTick Capital Markets. She noted that despite the recent positive jobs data in the United States, she does not believe the Fed is in a position to cut off its monetary stimulus. Latin American FX prices at 2100 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0238 -0.43 0.80 Mexico peso 12.0840 -0.73 6.46 Chile peso 473.7000 -0.36 1.06 Colombia peso 1833.8500 -0.20 -3.70 Peru sol 2.6010 -0.04 -1.92 Argentina peso 5.2275 -0.10 -6.03 Argentina peso 9.9800 4.71 -32.06 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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