EMERGING MARKETS-Chile's peso firms on copper; region weaker
Mon Aug 30, 2010 9:04pm IST
* U.S. personal income data weighs on region
* Mexican peso loses 1 pct, hitting 8-week low
* Mexican drug violence starts to worry investors
By Samantha Pearson
SAO PAULO, Aug 30 (Reuters) - The Chilean peso hit its strongest level in seven months on Monday, outperforming the region's major currencies, as the price of copper, Chile's main export, rallied.
Data showing the country rapidly recovering from a devastating earthquake this year also helped the peso to firm while the rest of Latin America's major currencies weakened.
Industrial output in Chile jumped 3.3 percent in July from the previous year. [ID:nN30172032]
U.S. personal income rose less than expected last month, weighing on other currencies due to concerns a sharp slowdown in the United States could reduce demand for the region's exports, particularly those of Mexico. [ID:nN30169545]
The Chilean peso CLP= firmed 0.14 percent to 498.80 per dollar, breaking the closely-watched 500 peso-per-dollar level and touching its strongest intraday value since January 21.
The price of copper rallied to its highest level in more than three months on Monday, lifting the peso in early trading. [ID:nN30385327]
The currency has gained support from expectations Chile's central bank will have to keep raising interest rates to control inflation in the post-earthquake boom, said Eduardo Suarez, an emerging markets strategist at RBC in Toronto.
"To some degree, there was also a reduction in the concerns about the authorities intervening in the foreign exchange market in the very near-term," he added.
Chile's government has increased its warnings about the currency's rapid appreciation but recent comments have been less forceful, said Suarez.
"The central bank actually said that on a real-effective exchange rate basis (adjusted for the effects of inflation), the currency was more or less at fair value at its current level. So concerns have receded at least at these levels but if the currency keeps on appreciating we could see some intervention."
MEXICO AND BRAZIL'S CURRENCIES SUFFER
The Brazilian real (BRBY) weakened for the first time in four sessions following Monday's U.S. personal income data, bidding 0.29 percent weaker at 1.756 reais per U.S. dollar on the local spot market.
But U.S. growth concerns have hit the Mexican peso particularly badly since the country relies on its northern neighbor to buy the vast majority of its exports.
The Mexican currency MXN= weakened 0.98 percent to 13.148 per dollar, trading at its weakest level in eight weeks.
Analysts said the peso has also come under pressure from increasing violence in the country which had previously been largely ignored by investors worldwide.
Suspected drug hitmen killed the mayor of a small town in northern Mexico on Sunday in a region where two car bombs exploded last week and the bodies of 72 murdered migrant workers were found. [ID:nN29135738]
Mon Aug 30, 2010 9:04pm IST
* U.S. personal income data weighs on region
* Mexican peso loses 1 pct, hitting 8-week low
* Mexican drug violence starts to worry investors
By Samantha Pearson
SAO PAULO, Aug 30 (Reuters) - The Chilean peso hit its strongest level in seven months on Monday, outperforming the region's major currencies, as the price of copper, Chile's main export, rallied.
Data showing the country rapidly recovering from a devastating earthquake this year also helped the peso to firm while the rest of Latin America's major currencies weakened.
Industrial output in Chile jumped 3.3 percent in July from the previous year. [ID:nN30172032]
U.S. personal income rose less than expected last month, weighing on other currencies due to concerns a sharp slowdown in the United States could reduce demand for the region's exports, particularly those of Mexico. [ID:nN30169545]
The Chilean peso CLP= firmed 0.14 percent to 498.80 per dollar, breaking the closely-watched 500 peso-per-dollar level and touching its strongest intraday value since January 21.
The price of copper rallied to its highest level in more than three months on Monday, lifting the peso in early trading. [ID:nN30385327]
The currency has gained support from expectations Chile's central bank will have to keep raising interest rates to control inflation in the post-earthquake boom, said Eduardo Suarez, an emerging markets strategist at RBC in Toronto.
"To some degree, there was also a reduction in the concerns about the authorities intervening in the foreign exchange market in the very near-term," he added.
Chile's government has increased its warnings about the currency's rapid appreciation but recent comments have been less forceful, said Suarez.
"The central bank actually said that on a real-effective exchange rate basis (adjusted for the effects of inflation), the currency was more or less at fair value at its current level. So concerns have receded at least at these levels but if the currency keeps on appreciating we could see some intervention."
MEXICO AND BRAZIL'S CURRENCIES SUFFER
The Brazilian real (BRBY) weakened for the first time in four sessions following Monday's U.S. personal income data, bidding 0.29 percent weaker at 1.756 reais per U.S. dollar on the local spot market.
But U.S. growth concerns have hit the Mexican peso particularly badly since the country relies on its northern neighbor to buy the vast majority of its exports.
The Mexican currency MXN= weakened 0.98 percent to 13.148 per dollar, trading at its weakest level in eight weeks.
Analysts said the peso has also come under pressure from increasing violence in the country which had previously been largely ignored by investors worldwide.
Suspected drug hitmen killed the mayor of a small town in northern Mexico on Sunday in a region where two car bombs exploded last week and the bodies of 72 murdered migrant workers were found. [ID:nN29135738]