EMERGING MARKETS-Latam currencies slip on Spain protests

by on September 26, 2012 9:17 pm GMT

Wed Sep 26, 2012 5:17pm EDT

* Madrid mass protests increase tensions in the euro zone
    * Brazil real flat on central bank intervention fears
    * Mexican peso 0.12 pct lower; Chilean peso down 0.11 pct

    By Jean Arce
    MEXICO CITY, Sept 26 (Reuters) - Latin American currencies
edged down on Wednesday as growing opposition to austerity
measures in Spain added to jitters over the euro zone debt
crisis, but recent stimulus measures in the United States were
seen limiting losses.
    Protests against austerity measures erupted in Madrid,
making it more difficult for Prime Minister Mariano Rajoy to
request international financial aid -- a condition for Spain to
receive support from the European Central Bank.
    Investors fear that a delay in the ECB bond-buying program
would further complicate the euro-zone debt crisis, potentially
dragging more economies into recession.
    "The Spanish government is resisting the possibility of a
asking for a bailout. It is still not clear what they will ask
for and that is making the market nervous," said Juan Carlos
Alderete, a currency strategist at Banorte-IXE in Mexico City.
    The Mexican peso lost 0.12 percent to 12.8670 per
dollar while the Chilean peso bid 0.11 percent weaker
at 470.50 per dollar.
    The Brazilian real  was near flat, however, in a
seventh consecutive session of very low volatility. A recent
bout of strong central bank intervention left investors
unwilling to make big bets on the direction of the real.
    Despite expectations of short-term losses, traders said both
the Mexican and Chilean pesos are set to gain in the medium term
as U.S. stimulus measures increase dollar flows to emerging
    The cost of dollars in local currencies could keep rising,
but it would likely hit resistance around 474 Chilean pesos per
dollar, while losses in the Mexican currency were seen limited
to 13.05 or 13.10 per dollar, traders said.      
    The real was little changed as investors refrained from
making bigger bets in a market that remains under constant
threat of central bank intervention. Brazilian policymakers have
bound the real to a very narrow trading range of 2.0 to 2.1 per
dollar as they vow to use all means necessary to offset capital
inflows resulting from the U.S. Federal Reserve's stimulus
    "Investors got scared with all this intervention talk," said
Gustavo Godoy, manager of the treasury desk of Daycoval bank in
Sao Paulo. "You have the whole world to invest your money, why
bring it to a market that is subject to intervention?"
    Latin American FX prices at 2045 GMT:
 Currencies                            daily %  year-to-
                                        change     ate %
                              Latest              change
 Brazil real                  2.0337      0.03     -8.12
 Mexico peso                 12.8760     -0.12      8.49
 Argentina peso*              6.2700      0.80    -24.56
 Chile peso                 470.5000     -0.11     10.37
 Colombia peso            1,797.3000     -0.02      7.85
 Peru sol                     2.5940      0.08      3.97
 * Argentine peso's rate between