RIO DE JANEIRO: The currencies of Mexico and Brazil edged lower in thin holiday trading on Friday as yields on 10-year US Treasury notes rose above 3 percent for the first time since September, potentially encouraging investors to exit riskier emerging markets.
Concern about the pace of withdrawal of US monetary stimulus, which could drive Treasuries yields higher, are expected to weigh on Latin American currencies next year.
The US Federal Reserve will scale back its bond-buying program by $10 billion to $75 billion a month as of next year, and future cuts will depend on the pace of recovery of the US economy.
Brazil's real dropped 0.1 percent after three consecutive sessions of gains. It has weakened over 13 percent so far this year even as losses have been cushioned by heavy central bank intervention in the foreign exchange market.
Brazil's central bank on Friday offered as much as $1.66 billion on the spot market with repurchase agreement set to May 4, 2014. That auction is intended at rolling over similar dollar lines that are about to expire.
Later this morning, as part of its regular intervention program, Brazil's central bank will offer as much as $1 billion on the spot market with repurchase date set to June 3, 2014.
Brazilian policymakers will halve their forex intervention program in 2014, a move that will make the currency more vulnerable to the withdrawal of the Fed's stimulus, analysts say.
Mexico's peso , Latin America's most liquid currency, weakened 0.2 percent. It has posted losses during five of the past six sessions as speculation about the future of US stimulus takes a tool in emerging market currencies.
Chile's peso rose 0.2 percent as the price of copper, the country's main export product, reached a four-month high on the London Metal Exchange.
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