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Mexican peso gains on Carstens remark; real up

The Mexican peso gained on Friday after central bank chief Agustin Carstens said the currency was undervalued, suggesting policymakers would tolerate a stronger exchange rate before intervening in the market. Other Latin American currencies suffered as weaker-than-expected US GDP growth data reduced investors' appetite for commodities and emerging market assets, although the Brazilian real was boosted by expectations of dollar inflows from companies raising money from foreign investors.

The Mexican peso gained 0.3 percent to 12.1490 per dollar as Carstens said the currency was still undervalued compared to before the 2008 crisis, and that optimism about economic reforms could fuel even more gains. "That gives me an indication that he will remain comfortable if the peso continues on its appreciation trend toward 12 per dollar or stronger," said Enrique Alvarez, head of Latin America research at IDEAglobal in New York. The peso hit a 20-month high of 12.04 per dollar just 15 days ago, but gave up some of its gains in the past few sessions amid signs of an economic slowdown in the United States, Mexico's main trading partner.

The Brazilian real firmed for the third consecutive session as investors anticipated dollar inflows from the initial public offerings of Banco do Brasil's insurance unit BB Seguridade and Gol airline's frequent-flyer program Smiles. BB Seguridade raised about $5.7 billion on Thursday, the world's largest IPO in seven months, while Smiles obtained some $560 million. Both attracted a great number of foreign investors. Other Latin American currencies posted losses, however, as a disappointing economic performance by the United States in the first quarter weighed on prices of commodities and other risky assets. The Chilean peso slid 0.25 percent as the price of copper, the country's main export product, dropped more than 2 percent.

Copyright Reuters, 2013


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