RIO DE JANEIRO, Aug 24 (Reuters) - Latin American currencies weakened or trimmed gains against the U.S. dollar in late trading on Wednesday as investors judged the prospects for world economic growth to be weak.
The declines came as business confidence in Germany, Europe's largest economy, dropped to its lowest level in 14 months and after Moody's Investors Service cut Japan's debt rating to Aa3 from Aa2.
The data from Germany does not bode well for investment in the world's second-largest exporter. The Japanese rating cut could boost borrowing costs in the world's third-largest economy, reducing the relative attractiveness of higher-yielding Latin American investments.
Japanese investors hunting higher returns than they can get at home have been a key source of speculative capital in Latin America, helping Brazil's real and other currencies rise.
"The market is very unstable and will likely remain so until we can get some clearer idea of the direction of world growth," said Mario Battistel, head of foreign exchange at Fair Corretora, a Sao Paulo currency brokerage.
"The short-term outlook is not good, investors are cautious, they see a minefield."
The outlook is so negative, Battistel added, that stronger-than-expected U.S. durable goods orders had little or no effect on Wednesday's regional declines.
"Frankly, people are waiting for Bernanke to talk on Friday," Battistel said referring to a scheduled address in Jackson Hole, Wyoming, by U.S. Federal Reserve Chairman Ben Bernanke that some expect to include new stimulus measures for the U.S. economy.
Increased orders for autos, aircraft, washing machines and other expensive, long-lasting manufactured products, under the umbrella term of durable goods, show the U.S. economy has more power to grow than previously thought.
Not even Mexico's peso pulled out of its dive in the wake of the U.S. durables data. Mexico gets about 80 percent of its export earnings from the United States, much of it from the sale of big-ticket durable goods.
The peso MXN=D2, Latin America's most-traded currency, weakened 1.24 percent to 12.4665 to the dollar.
Mexican local bonds MX10YT=RR also plunged, with the 10 year, peso-denominated "bono" falling 2.49 to 104.09 percent of face value, its biggest one-day drop since June 21. The yield rose to 6.12 percent.
The country posted a seasonally adjusted trade deficit MXTBAL=ECI of $364 million in July, 45 percent more than a year earlier and 18 percent more than in June, the government said on Wednesday.
The non-adjusted deficit was $1.179 billion in July compared with a surplus of $108 million in June.
Brazil's real BRBY, the region's second-most-traded currency, weakened 0.65 percent to 1.6097 to the dollar.
Argentina's peso ARSB= also dropped. The country's unofficial, or parallel, exchange rate slipped 0.51 percent to 4.385, a record low and its biggest one-day decline in two weeks.
The country's trade surplus shrank by nearly a quarter to $673 million in July compared with a year earlier as imports outpaced exports. The median estimate in a survey of analysts by Thomson Reuters was for a surplus of $760 million.
Argentina's official, central-bank-controlled rate ARS=RASL was unchanged at 4.185 to the dollar.
The real and Argentina's peso may be in for more declines. In a note to investors on Wednesday, Flavia Cattan-Naslausky of RBS Capital in Greenwich, Connecticut, recommended selling the Brazilian real and Argentine peso, buying the Chilean and Colombian pesos and maintaining Mexican peso holdings.
Brazil's real will not strengthen much beyond 1.60 to the the dollar without prompting intervention by Brazil's central bank and finance ministry, Cattan-Naslausky said.
Peru's sol PEN=PE was little changed from Tuesday at 2.7310 to the dollar.
Chile's peso CLP=CL gave up some early gains to firm 0.11 percent to 467.70 to the dollar.
Colombia's peso COP2=STFX firmed 0.17 percent to 1,786.01 after earlier strengthening as much as 0.25 percent.
By Jeb Blount
Source: www.reuters.com
The declines came as business confidence in Germany, Europe's largest economy, dropped to its lowest level in 14 months and after Moody's Investors Service cut Japan's debt rating to Aa3 from Aa2.
The data from Germany does not bode well for investment in the world's second-largest exporter. The Japanese rating cut could boost borrowing costs in the world's third-largest economy, reducing the relative attractiveness of higher-yielding Latin American investments.
Japanese investors hunting higher returns than they can get at home have been a key source of speculative capital in Latin America, helping Brazil's real and other currencies rise.
"The market is very unstable and will likely remain so until we can get some clearer idea of the direction of world growth," said Mario Battistel, head of foreign exchange at Fair Corretora, a Sao Paulo currency brokerage.
"The short-term outlook is not good, investors are cautious, they see a minefield."
The outlook is so negative, Battistel added, that stronger-than-expected U.S. durable goods orders had little or no effect on Wednesday's regional declines.
"Frankly, people are waiting for Bernanke to talk on Friday," Battistel said referring to a scheduled address in Jackson Hole, Wyoming, by U.S. Federal Reserve Chairman Ben Bernanke that some expect to include new stimulus measures for the U.S. economy.
Increased orders for autos, aircraft, washing machines and other expensive, long-lasting manufactured products, under the umbrella term of durable goods, show the U.S. economy has more power to grow than previously thought.
Not even Mexico's peso pulled out of its dive in the wake of the U.S. durables data. Mexico gets about 80 percent of its export earnings from the United States, much of it from the sale of big-ticket durable goods.
The peso MXN=D2, Latin America's most-traded currency, weakened 1.24 percent to 12.4665 to the dollar.
Mexican local bonds MX10YT=RR also plunged, with the 10 year, peso-denominated "bono" falling 2.49 to 104.09 percent of face value, its biggest one-day drop since June 21. The yield rose to 6.12 percent.
The country posted a seasonally adjusted trade deficit MXTBAL=ECI of $364 million in July, 45 percent more than a year earlier and 18 percent more than in June, the government said on Wednesday.
The non-adjusted deficit was $1.179 billion in July compared with a surplus of $108 million in June.
Brazil's real BRBY, the region's second-most-traded currency, weakened 0.65 percent to 1.6097 to the dollar.
Argentina's peso ARSB= also dropped. The country's unofficial, or parallel, exchange rate slipped 0.51 percent to 4.385, a record low and its biggest one-day decline in two weeks.
The country's trade surplus shrank by nearly a quarter to $673 million in July compared with a year earlier as imports outpaced exports. The median estimate in a survey of analysts by Thomson Reuters was for a surplus of $760 million.
Argentina's official, central-bank-controlled rate ARS=RASL was unchanged at 4.185 to the dollar.
The real and Argentina's peso may be in for more declines. In a note to investors on Wednesday, Flavia Cattan-Naslausky of RBS Capital in Greenwich, Connecticut, recommended selling the Brazilian real and Argentine peso, buying the Chilean and Colombian pesos and maintaining Mexican peso holdings.
Brazil's real will not strengthen much beyond 1.60 to the the dollar without prompting intervention by Brazil's central bank and finance ministry, Cattan-Naslausky said.
Peru's sol PEN=PE was little changed from Tuesday at 2.7310 to the dollar.
Chile's peso CLP=CL gave up some early gains to firm 0.11 percent to 467.70 to the dollar.
Colombia's peso COP2=STFX firmed 0.17 percent to 1,786.01 after earlier strengthening as much as 0.25 percent.
By Jeb Blount
Source: www.reuters.com
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