July 2, 2012 / 3:58 PM / 5 years ago

EMERGING MARKETS-Brazil real gains past 2/dlr, Mexico peso falls

* Brazil real gains on expectation of more cenbank action
    * US data, fading Pena Nieto optimism weigh on Mexican peso

    By Natalia Cacioli
    RIO DE JANEIRO, July 2 (Reuters) - The Brazilian real on
Monday strengthened past the level of 2 per dollar for the first
time in over one month on expectations of additional central
bank intervention, while the Mexican peso fell after
unexpectedly weak U.S. manufacturing data.
    The real  gained 1.0 percent to 1.9897 per
dollar as investors took Brazil's strong currency interventions
last week as a sign that policymakers will not allow the
exchange rate to depreciate much further.
    Brazil's central bank last week eased rules on export
prepayment and sold 180,000 currency swaps worth $9 billion in
three auctions. While the first measure allows more dollars to
flow into the country, the swap auction boosts the supply of
greenbacks in the futures market.
    "The market today is reflecting what happened last week: the
central bank intervened heavily with those three auctions, and
that calmed markets down," said Joao Medeiros, a director at
Pioneer brokerage in Sao Paulo.
    Medeiros added that the level of 1.9 reais per dollar could
become the new ceiling for the currency if Europe's financial
situation does not deteriorate further.
    In Mexico, however, the peso weakened 0.6 percent
after economic data in the neighboring United States showed the
manufacturing sector unexpectedly contracted in June, weighing
on prospects for the Mexican economy.   The
United States accounts for most of Mexico's exports.
    The peso had been little changed early in the session after
presidential front runner Enrique Pena Nieto claimed victory in
Sunday's elections, as analysts said the recent optimism with
the reforms he has pledged to carry on could vanish soon.
 
    "There are perhaps some early indications that the
(election) result may fail to fully meet the market's greatest
expectations," David Rees, emerging markets economist with
London-based Capital Economics, wrote in a research note.
    He mentioned concerns that Pena Nieto's coalition could fall
short of securing a majority in Congress when the full results
of the elections are announced on Wednesday.
    "At best that could cause reforms to be watered down, at
worst it could lead to a continuation of the political deadlock
that has stalled reform during the PAN's twelve-year stint in
the presidency," Rees added, referring to the political party of
outgoing president Felipe Calderon.
    
    Latin American FX prices from Reuters at 1540 GMT
    
 Currencies                            daily %     YTD %
                                        change    change
                              Latest            
 Brazil real                  1.9897      0.97     -6.09
                                                
 Mexico peso                 13.3900     -0.26      4.33
                                                
 Argentina peso*              5.9100      0.68    -19.97
                                                
 Chile peso                 500.0000      1.86      3.86
                                                
 Colombia peso              national      0.0       8.67
                             holiday            
 Peru sol                     2.6510      0.49      1.74
                                                
 * Argentine peso's rate between                        
 brokerages

0 : 0
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