EMERGING MARKETS-Latam FX up on talk of Spain banks rescue

Thu Jun 7, 2012 1:07am IST

* Germany, EU exploring ways to save Spanish banks - sources
    * Brazil real flat one day after central bank-led rally
    * Currencies of Mexico, Colombia up more than 0.5 pct
    * Chilean peso rallies 1.5 pct as copper prices rise

    By Walter Brandimarte	
    RIO DE JANEIRO, June 6 (Reuters) - Latin American currencies
rose on Wednesday on hopes European officials would soon come up
with a plan to rescue Spain's banks, but Brazil's real weakened
as investors feared possible negative developments in external
markets ahead of a national holiday.	
    Mexico's and Colombia's currencies gained
more than half a percentage point on reports Germany and
European Union officials were urgently exploring ways to
recapitalize Spanish banks. 	
    The Chilean peso closed at a two-week high, also
boosted by higher commodity prices.	
    "The initial stabilization in external risk appetite
suggests a recovery across those assets with stronger technicals
and fundamentals," Siobhan Morden, head of Latin America
strategy at Jefferies & Co, said in a research note, citing an
expected recovery in the Mexican peso.	
    Fears the euro zone debt crisis could further escalate and
hurt Latin American exports to Europe have weighed on those
currencies in the past few weeks, driving the Mexican peso to a
three-year low of around 14.6009 per dollar earlier in the
month.	
    The Mexican peso traded at 14.082 per dollar, 0.97 percent
higher on the day.	
    Risk aversion also contributed to the currency selloff as
investors have been withdrawing cash from Latin American bond
and stock funds. In May, Brazil recorded dollar outflows of
$1.511 billion, according to central bank data.	
    But a recovery in commodity prices supported the currencies
of major metal exporters such as Chile. 	
    "The (Chilean) peso is gaining in line with external
markets. Copper prices are rising and that boosts demand for the
Chilean currency," said Sergio Tricio, head of research at Forex
Chile. "We anticipate a short-term strengthening trend, with the
peso nearing 506 per dollar."	
    The Chilean peso closed at 506.40 per greenback, 1.15
percent higher from the previous session, as U.S. copper prices
 soared 2.7 percent.	
    	
    BRAZIL'S REAL DROPS	
    The Brazilian real  weakened 0.7 percent to
2.031 per dollar, however, before a national holiday on
Thursday.	
    "Nobody wants to be caught with currency exposure during the
holiday," said Marcos Trabbold, a currency trader with B&T
brokerage in Sao Paulo, referring to lingering concerns over the
European debt crisis.	
    The real had jumped more than 1 percent on Tuesday as the
central bank intervened in the market for the first time in more
than a week, auctioning currency swap contracts that have a
market impact similar to the sale of dollars in the futures
market.	
    The intervention reinforced investors' perception the
central bank was drawing an informal line around 2.05 reais per
dollar.    	
    Latin America FX prices from Reuters at 1917 GMT:      	
 Currencies                              daily    yearly
                                           pct       pct
                              Latest    change    change
 Brazil real                  2.0310     -0.71     -8.00
                                                
 Mexico peso                 14.0814      0.97     -0.79
                                                
 Argentina peso*              5.9300     -0.17    -20.24
                                                
 Chile peso                 506.4000      1.15      2.55
                                                
 Colombia peso            1,781.4400      0.59      8.81
                                                
 Peru sol                     2.6850      0.34      0.45
                                                
 * Argentina peso's rate between                        
 brokerages