Latam currencies drop on profit taking

RIO DE JANEIRO: Latin American currencies weakened on Monday as a combination of disappointing US factory data and brewing political worries in Europe encouraged investors to pocket recent gains in emerging markets and other risky asset classes.

The Mexican peso, the most liquid Latin American currency, lost 0.8 percent in overseas trading as Mexican markets were closed for a holiday.

Despite its losses, the peso remained nearly 1.5 percent stronger year-to-date after rallying 0.8 percent on Friday on the back of strong manufacturing data in the United States, Mexico's main trading partner.

Investors are also watching the results of a government probe to find out whether an explosion on Thursday that killed 33 people at the headquarters of Pemex was an attack or an accident. The peso could suffer if the investigation shows the state-run oil monopoly was the target of an attack, analysts said.

Losses in the peso and in other Latin American currencies were mostly a result of a more cautious global environment after US data showed factory orders rose less than expected in December, a possible sign that companies were losing confidence in the strength of the world's largest economy.

Global aversion to risk was also fueled by rising political jitters in Europe, including a corruption scandal in Spain and polls showing Italian former Prime Minister Silvio Berlusconi gaining ground ahead of elections this month.

The Chilean peso lost 0.3 percent while the Colombian peso was 0.7 percent weaker.

"European markets are down on concerns about Spain and US markets are suffering by some weaker-than-expected quarterly results. All of that is weighing on the (Chilean) peso," said Eugenio Cortes, head of forward trading at EuroAmerica.

The Brazilian real was little changed for the fourth consecutive session, however, hovering around the level of 1.99 per dollar.

Investors took the latest Brazilian central bank interventions in the foreign exchange market as a sign that policymakers want the currency to remain around the mark of 2 per dollar in order to avoid additional inflationary pressures