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EMERGING MARKETS-Latam FX gains on ECB talk, US stimulus hopes
July 25, 2012 / 9:54 PM / 5 years ago

EMERGING MARKETS-Latam FX gains on ECB talk, US stimulus hopes

 * Brazil central banker signals willingness to intervene
 * Brazil real firms 0.34 pct, Mexico peso up 0.78 pct
 By Rachel Uranga and Natalia Cacioli
 MEXICO CITY/SAO PAULO, July 25 (Reuters) - Latin American
currencies gained on Wednesday, halting a three-day slide, as
investors speculate that the U.S. Federal Reserve may soon
deploy additional monetary stimulus and hopes rose Europe could
stem the region's debt crisis.
 The Brazilian real  firmed by 0.34 percent and
the Mexican peso strengthened 0.78 percent. Meanwhile,
the Chilean peso was 0.65 percent higher.
 A European Central Bank policymaker said on Wednesday he was
open to the idea of giving Europe's new permanent rescue fund a
banking license, which would enable it to borrow unlimited
central bank money and boost its capacity to fight the crisis.
 "Anything that increases the ability to purchase sovereign
debt and extend the timeframe to which some euro zone countries
may need to lower their debt levels and boost growth is seen as
a positive development," said Clyde Wardle, a Latin American
currency strategist at HSBC in New York. "But all of this is all
based on comments rather than firm decisions."
 The currencies of Brazil, Mexico and Chile all posted losses
in the past three sessions as concerns were heightened that
Spain could need a full-fledged bailout.
 In the days ahead, Wardle said a jump in yields in Spain and
Italy could weaken the Mexican peso, one of the most widely
traded currencies and highly sensitive to global economic
 Meanwhile, signs of a gloomy global economy limited gains in
higher-risk assets. Weak readings on Britain's gross domestic
product, falling U.S. new home sales and a German business
sentiment survey all added to worries about the global economic
 In Brazil, market players remained concerned the government
would meddle in currency markets if the real moves outside of
the central bank's comfort zone in the range between 2.00 and
2.10 per dollar.
 Central bank governor Alexandre Tombini on Tuesday
reiterated the bank is ready to intervene into local currency
markets when they are "not working properly." 
 Riskier assets, including emerging market currencies, got a
lift from a report in The Wall Street Journal on Tuesday saying
the Federal Reserve may be moving closer to more stimulus that
would aid the economy. 
 The Fed's past bond buying programs have driven down yields
on U.S. Treasury debt and pushed investors to seek out higher
yields in riskier assets. 
 "Expectations that the Fed may move up its third round of
stimulus to August encouraged investors," said Luciano Rostagno,
chief strategist at WestLB bank in Sao Paulo.
 Latin American FX prices at 2050 GMT:
 Currencies                               daily pct     yearly
                               Latest     change        pct
 Brazil real                      2.0363       0.34      -8.11
 Mexico peso                     13.6010       0.78       2.71
 Argentina peso*                  6.4100       0.31     -26.21
 Chile peso                     491.5000       0.65       5.66
 Peru sol                         2.6370       0.15       2.28
 * Argentina peso's rate between                              
 (Reporting by Rachel Uranga, editing by Gary Crosse)

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