LatAm currencies volatile on Europe concern
Brazil's real whipsawed in afternoon trading on Friday, as further negative developments in the euro-zone debt crisis and low trading volumes kept volatility high. Pressure has continued to build on the euro zone as talks by the heads of Germany, France and Italy on Thursday failed to find a solution as Germany opposed a joint euro-zone bond and a bigger role for the European Central Bank to stem the crisis.
Copyright Reuters, 2011
Adding to that pressure, Italy paid a record 6.5 percent to borrow over six months on Friday and its longer-term borrowing costs soared far above levels seen as sustainable for public finances. The lack of investor confidence in a solution to the euro-zone crisis remained a driver of global markets, with the euro hitting a seven-week low on Friday.
"The only thing affecting the markets is Europe and the euro," said Pedro Tuesta, a broker with 4Cast in Washington. "The uncertainty and the lack of confidence from the market in anyone in European government will continue to hamper." Europe's debt crisis and the risks it poses to the world economy have prompted many investors to buy assets in dollars, the world's most-traded currency, and sell assets denominated in Latin American currencies, which are considered riskier.
In a traditionally low-volume day, as many UStraders extend the Thanksgiving holiday into a four-day weekend, volatility remained high. Brazil's real gained 0.51 percent to trade at 1.8819 against the US dollar, recovering from losses of as much as 1.27 percent in early-session trading, where it reached a low of 1.9152. "In a low-volume, low-activity environment, every move is emphasised," Tuesta added. Brazil's real has lost over 9.5% against the US dollar in November Mexico's peso lost 0.5 percent to trade at 14.264 against the dollar, reaching its lowest level since April 2009.
"The negative news coming out about European debt continues to move the markets," said Enrique Trejo, head of currency trading at brokerage IXE in Mexico City. "A deterioration in Italy could mean a deterioration in the United States and diminish any economic recovery. That would hit emerging markets." Trejo expects Friday's peso trading range to fall between 14.14 and 14.35. Colombia's peso lost 0.48 percent to 1,945.00, while Peru's sol weakened 0.04 percent to 2.707.