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EMERGING MARKETS-Latam FX gains for 3rd day on stimulus hopes

by on July 27, 2012 3:42 pm BST
 

Fri Jul 27, 2012 11:42am EDT

* Euro zone policymakers seen acting to support Spain, Italy
    * Fed also expected to deploy additional stimulus
    * Mexico peso jumps 1 pct, Chilean peso at 2-1/2 month high
    * Brazil real stuck in narrow trading range

    By Walter Brandimarte
    RIO DE JANEIRO, July 27 (Reuters) - Latin American
currencies gained for the third straight session on Friday on
hopes for additional economic stimulus on both sides of the
Atlantic that could result in strong foreign-currency flows into
emerging markets.
    The Mexican peso led gains in the region, rallying 1
percent after German Chancellor Angela Merkel and French
President Francois Hollande pledged to do all in their power to
protect the euro. 
    Their joint statement added to expectations that European
policymakers are ready to act. Earlier, French newspaper Le
Monde reported euro-zone governments and the European Central
Bank are preparing to intervene in financial markets to help
bring down Spanish and Italian borrowing costs. 
    "Markets are waiting for the ECB next week, especially after
Draghi yesterday," said Jankiel Santos, chief economist at BES
Investimento in Sao Paulo, referring to remarks by the ECB chief
Mario Draghi, who said on Thursday that the bank would do
"whatever it takes" to preserve the euro.
    Bets that the U.S. Federal Reserve would deploy additional
stimulus measures were also on the rise after data showed the
U.S. economy slowed in the second quarter as consumers spent at
their slowest pace in a year.  
    The Chilean peso rose 0.4 percent to 483.70 per
dollar, its strongest level in more than 2-1/2 months, also
benefiting from an over 1 percent rise in the price of copper
, the country's main export product.
    "The peso pierced the level of 485.00 per dollar, which now
became a floor for the currency in the short term," said Sergio
Tricio, head of research at Forex Chile.
    The Brazilian real  gained a more modest 0.2
percent to 2.0169 per dollar, however, as investors feared the
central bank could intervene in the market if the currency
strengthens too much.
    The real has been stuck in a narrow range between 2.0 and
2.05 reais in the past several weeks, in what traders call an
informal trading band imposed by the central bank.

    Latin American FX prices at 1520 GMT:
    
 Currencies                            daily %     YTD %
                                        change    change
                              Latest            
 Brazil real                  2.0169      0.25     -7.36
                                                
 Mexico peso                 13.2799      0.99      5.19
                                                
 Argentina peso*              6.3800      0.63    -25.86
                                                
 Chile peso                 483.7000      0.41      7.36
                                                
 Colombia peso            1,791.2500      0.04      8.21
                                                
 Peru sol                     2.6240      0.50      2.78
                                                
 * Argentine peso's rate between                        
 brokerages