EMERGING MARKETS-Emerging currencies weaken broadly on Greece, Ukraine
(Recasts to broaden scope; adds quotes, updates prices) By Asher Levine SAO PAULO, Feb 11 (Reuters) - Emerging market currencies weakened against the dollar on Wednesday as fraught Greek debt negotiations and an escalation of violence in Ukraine sapped demand for higher-risk assets. Greek Finance Minister Yanis Varoufakis met euro zone finance ministers on Wednesday, pushing plans to scrap austerity measures and to restructure Greece's massive debt. But Germany has ruled out further assistance, raising fears of a possible debt default by Greece and its exit from the euro currency. "The logic of each side demands negotiating until the very last minute," Brown Brothers Harriman's Marc Chandler wrote in a client note. "Of course, the nature of the brinkmanship exercise risks a miscalculation that sends both over the abyss." Meanwhile, worries that the conflict in Ukraine could broaden also drove a flight to safe-haven assets, helping push Turkey's lira to a record low and South Africa's rand to its weakest level in nearly 13 years. "As people turn to sell emerging markets, those countries with balance of payments problems such as Turkey and South Africa are getting hit the hardest," said Sebastien Barbe, head of emerging market strategy at Credit Agricole in Paris. In Latin America, the Brazilian real dropped more than 1 percent as disappointing monthly retail sales data helped drag the currency further past 10-year lows. Other currencies in the region weakened as well, with the Colombian peso and the Mexican peso hit by a further decline in oil prices. Brazil's real fell as low as 2.8777 per dollar on Wednesday after data showed retail sales declined at the sharpest pace on record in December. Concerns about the deterioration of Brazil's economy, combined with expectations of higher U.S. interest rates, have contributed to the real's roughly 6 percent fall so far in February. Brazilian inflation expectations continue to climb while growth forecasts increasingly point to another economic recession in Latin America's largest economy this year. Investors fear that the slowdown could loosen the government's commitment to making the fiscal adjustments the country needs to ward off a credit rating downgrade. In Venezuela, government bond prices tumbled after Caracas announced a new foreign exchange platform that was seen as insufficient to resolve the country's economic crisis. Venezuela has struggled to find dollars to pay for imports as its oil export revenues tumble with lower oil prices. "They are racing against time. They have a huge financing gap and they are taking only small steps," said Siobhan Morden, head of Latin America strategy at Jefferies in New York. "I would say there is still a high probability of default this year. They might survive to 2016." (Additional reporting by Sujata Rao in London and David Gaffen in New York; editing by Paul Simao and G Crosse)
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