EMERGING MARKETS-Brazil's real sinks on debt data; Mexico peso up on intervention
By Asher Levine SAO PAULO, July 31 (Reuters) - Brazil's currency sank its most in nearly three months on Friday after worse-than-expected government debt data raised investor fears of a credit downgrade, while Mexico's currency gained following new government efforts to support the struggling peso. Other currencies in the region were little changed, though Colombia's peso posted a modest rebound after hitting its weakest in nearly 12 years on Thursday. The Brazilian real started the trading session slightly higher against the dollar but moved into negative territory after the central bank reported a much wider-than-expected primary budget deficit for June. Brazil's public accounts continue to suffer under a weakening economy, contributing to investor expectations that the country could lose its investment-grade credit rating. The real sank to 3.41 per dollar in early-afternoon trading, a closing level since March, 2003. Traders said part of the day's volatility was also due to end-of-the-month positioning, when the so-called Ptax rate, used in some financial contracts, is set. Meanwhile, Mexico's peso moved in the opposite direction, posting its biggest one-day gain in over four months. Mexico substantially bolstered its intervention program on Thursday in an effort to defend the peso as the central bank warned the currency could slump further after a recent string of record lows. On Friday Mexico's Central Bank chief, Agustin Carstens, said policymakers could raise interest rates at any time to defend the peso, independently of what the U.S. Federal Reserve does. "Even if the peso continues to depreciate against the dollar, it would do so at slower pace than other emerging market currencies," wrote Nomura's Benito Berber in a client note. The peso is down about 21 percent over the past 12 months while the real has dropped about 50 percent. As they fall, other emerging market assets have also declined, driven partly by the outlook for higher interest rates in the United States and slowing demand from major commodities buyer China. Meanwhile, equities markets moved higher, with the MSCI Latin American stock index nearly winning back the previous session's losses. Brazil's Bovespa stock index gained about 1 percent, driven by shares of banks and financial companies. Key Latin American stock indexes and currencies at 1502 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 901.85 0.87 -6.51 MSCI LatAm 2284.52 1.05 -17.12 Brazil Bovespa 50362.2439 0.93 0.71 8 Mexico IPC 44351.85 -0.05 2.80 Chile IPSA 3842.26 1.43 -0.23 Chile IGPA 18711.89 1.23 -0.84 Argentina MerVal 11182.8 -0.37 30.35 Colombia IGBC 10064.22 -0.15 -13.50 Venezuela IBC 15471.8 0 300.95 Currencies daily % YTD % change change Latest Brazil real 3.4114 -1.21 -22.10 Mexico peso 16.005 1.66 -7.88 Chile peso 671.5 0.30 -9.69 Colombia peso 2856.4 0.68 -16.40 Peru sol 3.1911 0.06 -6.65 Argentina peso 9.1850 0.00 -6.91 (interbank) Argentina peso 14.88 0.20 -5.91 (parallel) (Editing by Jeffrey Benkoe)
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