September 13, 2012 / 6:01 PM / 5 years ago

EMERGING MARKETS-Latam currencies rally on Fed stimulus plan

* Fed to buy $40 bln of mortgage debt per month
    * Fed to keep rates at record lows until at least mid-2015
    * Brazil says won't let its currency appreciate
    * Mexico peso gains 0.8 pct, Brazilian real up 0.3 pct

    By Walter Brandimarte
    SAO PAULO, Sept 13 (Reuters) - Latin American currencies
rallied on Thursday after the U.S. Federal Reserve launched
another aggressive stimulus program that will likely increase
dollar inflows to emerging economies.
    The Mexican peso led gains, firming 1.2 percent to
12.8588 per U.S. dollar, its strongest since early April. The
peso rallied on previous Fed programs, which tend to drive down
yields on Treasuries and make emerging market assets more
attractive.
    The Brazilian real  rose a more modest 0.4
percent to 2.018, however, as investors feared the central bank
would intervene to keep the currency above 2 units per dollar, a
level the government considers beneficial to exporters.
    "We should see an appreciation pressure on the exchange
rate, which will likely test the level of 2 per dollar," said
Alexandre Andrade, an economist with Votorantim brokerage in Sao
Paulo. 
    In a sign that the so-called currency war was heating up
again, Brazil's Finance Minister Guido Mantega said the
government may deploy an "arsenal" of measures to cushion the
impact of dollar inflows into the domestic economy. 
    Speaking to reporters in Brasilia just after the Fed
announcement, Mantega promised the government will not allow the
real to appreciate. 
    The Brazilian central bank has managed to keep the real
within a tight range of 2.0 and 2.1 per dollar since early July.
On Wednesday, it sold $1.37 billion worth of reverse currency
swaps, derivatives contracts that mimic buying dollars in the
futures market, as part of its efforts to curb the real's gains.
    The Chilean peso rose 0.42 percent to close at a
more than one-year high of 472.70 before the Fed announcement.
The currency gained as local mining companies sold dollars in
the domestic market and as investors anticipated the Fed's move.
    
    Latin American FX prices at 1750 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.0180     0.37    -7.41
                                             
 Mexico peso               12.8588     1.22     8.64
                                             
 Argentina peso*            6.2900     0.48   -24.80
                                             
 Chile peso               472.7000     0.42     9.86
                                             
 Colombia peso          1,796.0000     0.29     7.93
                                             
 Peru sol                   2.6030     0.04     3.61
                                             
 * Argentine peso's rate between                    
 brokerages

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