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EMERGING MARKETS-Mexico peso slips before Fed meeting; auctions bolster real
June 18, 2013 / 2:47 PM / 4 years ago

EMERGING MARKETS-Mexico peso slips before Fed meeting; auctions bolster real

* Mexican peso falls as investors exit some markets
    * Real gains as Brazil auctions off currency swaps

    SAO PAULO, June 18 (Reuters) - Mexico's peso weakened for a
third straight day on Tuesday as some investors exited positions
in local bond and other markets ahead of a key U.S. Federal
Reserve policy meeting this week.
    Investors are awaiting signs of how long the Federal Reserve
will decide to continue massive monetary stimulus in the world's
biggest economy. A basket of Latin America's major stock markets
is down 10 percent this year, underscoring a surge in outflows.
    Latin American currencies have weakened in recent weeks on
worries the Fed may soon begin to slow a bond-buying program
that has helped keep U.S. interest rates at rock-bottom levels,
encouraging a steady inflow of dollars into emerging markets.
    Fed policymakers meet Tuesday and Wednesday; investors
expect signals on whether, and when, the Fed will start scaling
back its monthly $85 billion bond purchase program.
    * The Mexican peso lost 0.6 percent after some
foreign investors scaled down positions in some fixed-income
markets. Yet, the fact that the decline has not been bigger
means traders are still attentive to the Fed's Wednesday
decision, said Pedro Tuesta, an economist with Washington
D.C.-based market research firm 4Cast Inc. 
    The peso is currently trading below its 200-day moving
average. If the Fed begins to taper off the stimulus as soon as
possible, the peso may tumble to about 13.20 pesos per dollar
"within days," Tuesta added.
    * The Brazilian real  rose on Tuesday after the
central bank carried out a couple of auctions aimed at funneling
more foreign exchange into the futures markets. The move helped
reverse a tumble that left the real trading at the lowest level
in four years. 
    In recent days, foreign funds have exited positions in the
equity and bond markets following the government's decision to
eliminate a transactions tax on derivatives. "The decline has
put the central bank between a rock and a hard place," Tuesta
said.
     * The Chilean peso shed 1.4 percent as some
commodities prices fell.
    * The Colombian peso weakened 0.7 percent on Tuesday.
Growth likely lost momentum in the first quarter, but low
interest rates may limit the ability of policymakers to revive
growth in the country, traders said.
    
    Latin American FX prices at 14:27 GMT:
 Currencies                                daily %       YTD %
                                            change      change
                                   Latest           
 Brazil real                       2.1720    -0.30       -6.08
                                                    
 Mexico peso                      12.9100    -0.64       -0.35
                                                    
 Chile peso                      499.2000    -1.36       -4.11
                                                    
 Colombia peso                  1900.0000    -0.68       -7.05
 Peru sol                          2.7550    -0.40       -7.40
                                                    
 Argentina peso (interbank)        5.3375     0.00       -7.96
                                                    
 Argentina peso (parallel)         8.5200     0.35      -20.42

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