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EMERGING MARKETS-Latam FX weaken on Syrian geopolitical concerns
August 27, 2013 / 3:22 PM / 4 years ago

EMERGING MARKETS-Latam FX weaken on Syrian geopolitical concerns

By Tiago Pariz
    SAO PAULO, Aug 27 (Reuters) - Latin American currencies
weakened on Tuesday amid a broad sell-off of risk assets as
investors worried about the threat of military action by Western
governments against Syria.
    The unforeseeable impacts of a Syrian conflict on the global
economy and market sentiment added to lingering fears about an
expected withdrawal of U.S. stimulus measures, a move that could
reduce the amount of dollars seeking higher returns in emerging
markets.
    The increase in global geopolitical tensions brought a new
element of distress to the Brazilian foreign exchange market,
complicating a central bank attempt to stabilize it through a
program of daily currency interventions worth $60 billion in the
futures and spot markets.
    "Clearly the central bank program is far from eliminating
the strong swings we had in the real. The scenario is still
pretty worrisome and maybe the central bank will have to launch
more auctions than those that are scheduled," said Glauber
Romano, a currency trader at Intercam brokerage in Sao Paulo.
    The Brazilian real  lost 0.7 percent to 2.4016
per dollar, its second consecutive session of losses after
rallying 3.3 percent on Friday, one day after the central bank
announced its intervention program.
    Under that plan, the central bank will offer, Mondays
through Thursdays, $500 million a day of currency swaps,
derivative contracts designed to provide investors with hedge
against a weaker real. On Fridays, the central bank will offer
$1 billion on the spot market through repurchase agreements.
 
    When the program was announced on Thursday night, the
central bank said it could launch additional swap or spot dollar
sales if necessary to stabilize markets.
    As expected, Brazil's central bank on Tuesday sold 10,000
traditional currency swaps that are part of its daily
intervention schedule. It also announced that, in about three
weeks, it will start rolling over all of the 135,300 swaps that
mature on Oct 1. 
    In Mexico, whose economy relies heavily on the United
States, the peso slid 1.2 percent to 13.346 per dollar,
its weakest intraday level in over two months.
    The Chilean peso lost 0.6 percent in its second
consecutive session of losses.
    "The peso is being dragged lower by the other currencies in
the region, specially the Brazilian real, and it is also being
hurt by concerns about Syria, said a trader in Santiago.

    Latin American FX prices at 1450 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.4025    -0.81   -15.09
                                             
 Mexico peso               13.3615    -1.38    -3.72
                                             
 Chile peso               515.1000    -0.50    -7.07
                                             
 Colombia peso           1935.7000    -0.52    -8.77
                                             
 Peru sol                   2.8150    -0.18    -9.38
                                             
 Argentina peso             5.6400    -0.13   -12.90
 (interbank)                                 
                                             
 Argentina peso             9.4000    -1.28   -27.87
 (parallel)                                  
                                             
 
    

 (Additional reporting by Froilan Romero in Santiago; Writing by
Walter Brandimarte; editing by Andrew Hay)

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