EMERGING MARKETS-Latam currencies dip on US fears, intervention
Fri Aug 20, 2010 9:53am EDT
* Brazil's real dips 0.3 pct, Mexican peso weakens 0.4 pct
* Investors prepare for Colombian intervention
* Inflation surprises in Brazil, yields plunge
By Samantha Pearson
SAO PAULO, Aug 20 (Reuters) - Latin American currencies weakened early on Friday as concerns over the strength of the U.S. economy, following weak data on jobs and manufacturing on Thursday, prompted investors to sell the region's higher-risk assets.
Uncertainty over the timing of the upcoming share offering by state-run oil company Petrobras, which is expected to bring vast amounts of dollars to Brazil, also weighed on the Brazilian real.
"Players will continue to follow and react to the controversy of Petrobras' capitalization," Miriam Tavares, currency director at brokerage AGK Corretora in Sao Paulo, said in a note.
"And, in this sense, the probability that the capitalization will be delayed is becoming more and more likely, which could be negative for trading today, especially in the stock and foreign exchange markets."
On the local spot market, the bid quote for the real (BRBY) weakened 0.34 percent to 1.76 against the U.S. dollar.
The Mexican currency MXN= weakened 0.39 percent to 12.76 per dollar, ahead of the country's monthly interest rate decision. Analysts unanimously see the Mexican central bank holding its interbank reference rate MXCBIR=ECI at 4.5 percent. [ID:nN19265504]
The Chilean peso CLP= weakened 0.43 percent to 509.50 per dollar as the price of copper, the country's main export, fell.
"Markets abroad are very negative. Asian bourses fell, stock futures in the U.S. are also falling, and copper is dropping sharply. All of this was triggered by economic data from the U.S., which showed that their economy is struggling," said one trader in Santiago.
The Colombian peso COP=STFX lost 0.42 percent to 1,825.60 per dollar, retreating further from the two-year high it hit earlier this month. Economists believe the central bank will use its policy meeting later on Friday to announce measures to contain the peso's rapid rise.
"Pressure from exporters may be getting too heated for the government not to act," said analysts at RBC Capital Markets in a note.
The region's governments have stepped up their threats of currency intervention over the past few weeks, in response to even greater interest from foreign investors in Latin American assets.
Concerns over U.S growth are expected to keep returns on U.S. Treasuries pinned down at record lows, fueling strong demand for Latin America's higher-yielding debt and supporting currency appreciation.
BRAZIL INFLATION SURPRISES AGAIN
An unexpected drop in Brazil's consumer prices in the month to mid-August added to signs that growth in Latin America's economy is slowing more than forecast. [ID:nN20125845]
Brazil's IPCA index also slowed to 4.44 percent for the year, dipping below the central bank's main inflation target.
Yields plunged on Brazilian interest rate futures <0#DIJ:> as investors bet the country's central bank would be less likely to raise the cost of borrowing over the coming months.
The market shows traders expect no rate hike at the conclusion of the central bank's next meeting on September 1, and are increasingly betting on no rate increases next year either.
The yield on the contract due January 2012 DIJF2, one of the most heavily-traded contracts of the early session, fell to 11.13 percent from 11.22 percent in the previous session.
Fri Aug 20, 2010 9:53am EDT
* Brazil's real dips 0.3 pct, Mexican peso weakens 0.4 pct
* Investors prepare for Colombian intervention
* Inflation surprises in Brazil, yields plunge
By Samantha Pearson
SAO PAULO, Aug 20 (Reuters) - Latin American currencies weakened early on Friday as concerns over the strength of the U.S. economy, following weak data on jobs and manufacturing on Thursday, prompted investors to sell the region's higher-risk assets.
Uncertainty over the timing of the upcoming share offering by state-run oil company Petrobras, which is expected to bring vast amounts of dollars to Brazil, also weighed on the Brazilian real.
"Players will continue to follow and react to the controversy of Petrobras' capitalization," Miriam Tavares, currency director at brokerage AGK Corretora in Sao Paulo, said in a note.
"And, in this sense, the probability that the capitalization will be delayed is becoming more and more likely, which could be negative for trading today, especially in the stock and foreign exchange markets."
On the local spot market, the bid quote for the real (BRBY) weakened 0.34 percent to 1.76 against the U.S. dollar.
The Mexican currency MXN= weakened 0.39 percent to 12.76 per dollar, ahead of the country's monthly interest rate decision. Analysts unanimously see the Mexican central bank holding its interbank reference rate MXCBIR=ECI at 4.5 percent. [ID:nN19265504]
The Chilean peso CLP= weakened 0.43 percent to 509.50 per dollar as the price of copper, the country's main export, fell.
"Markets abroad are very negative. Asian bourses fell, stock futures in the U.S. are also falling, and copper is dropping sharply. All of this was triggered by economic data from the U.S., which showed that their economy is struggling," said one trader in Santiago.
The Colombian peso COP=STFX lost 0.42 percent to 1,825.60 per dollar, retreating further from the two-year high it hit earlier this month. Economists believe the central bank will use its policy meeting later on Friday to announce measures to contain the peso's rapid rise.
"Pressure from exporters may be getting too heated for the government not to act," said analysts at RBC Capital Markets in a note.
The region's governments have stepped up their threats of currency intervention over the past few weeks, in response to even greater interest from foreign investors in Latin American assets.
Concerns over U.S growth are expected to keep returns on U.S. Treasuries pinned down at record lows, fueling strong demand for Latin America's higher-yielding debt and supporting currency appreciation.
BRAZIL INFLATION SURPRISES AGAIN
An unexpected drop in Brazil's consumer prices in the month to mid-August added to signs that growth in Latin America's economy is slowing more than forecast. [ID:nN20125845]
Brazil's IPCA index also slowed to 4.44 percent for the year, dipping below the central bank's main inflation target.
Yields plunged on Brazilian interest rate futures <0#DIJ:> as investors bet the country's central bank would be less likely to raise the cost of borrowing over the coming months.
The market shows traders expect no rate hike at the conclusion of the central bank's next meeting on September 1, and are increasingly betting on no rate increases next year either.
The yield on the contract due January 2012 DIJF2, one of the most heavily-traded contracts of the early session, fell to 11.13 percent from 11.22 percent in the previous session.