Chile's peso led Latin American currencies higher, as copper rebounded from its biggest one-day loss in four weeks, on expectation Europe will find a solution to its debt crisis and signs of stronger Chinese demand. The region's currencies gained on Friday on cautious optimism Europe will announce a comprehensive plan by Wednesday to strengthen the eurozone rescue fund and recapitalise European banks.
Chile's peso firmed 1.17 percent to 513.00 to the dollar, trimming the peso's losses for the week to 2.61 percent. Copper for December 28 settlement gained 5.8 percent to $3.23 a pound in New York in late afternoon trading after falling 6.2 percent Thursday. Copper is responsible for more than half of Chile's export earnings.
"Chile is very dependent on copper and is clearly getting a boost from the metal's rebound," said Enrique Alvarez, head of Latin American research at IDEAGlobal, a New York financial research company. "Latin America, though, is also under the influence of Europe's debt crisis and right now people seem to believe we are moving toward a solution." After strengthening as much as 0.91 percent, Mexico's peso trimmed gains to trade at 13.6859, almost unchanged from Thursday. For the week the Mexican peso lost 3.11 percent.
Brazil's real firmed 0.95 percent to 1.7702 to the dollar, trimming weekly losses to 2.36 percent. Both the real and Mexican peso recorded large swings in Friday trading, weakening on reports European leaders were having difficulty coming to agreement on how a 440 billion euro debt bailout fund will be used to bolster bond prices of countries such as Spain and Italy to prevent their financing costs from rising to unsustainable levels. If Europe comes up with a satisfactory plan to bail out an increasingly insolvent Greece and protect the banking system from plunging sovereign bond prices, Campos expects Brazil's real to strengthen toward 1.70. If a plan is not announced, he expects the real to weaken to about 1.80.
Most Latin American currencies trimmed gains in late trading on Friday. Investors might prefer to hold the dollar, the world's most-traded or "liquid" currency, until there is a resolution of the European situation, Alvarez said. Colombia's peso firmed 0.85 percent to 1,892.65. Peru's sol firmed 0.15 percent to 2.7210. Peru is the world's second-largest copper producer and a growing producer of oil and gas. Colombia is a major coffee, coal and oil producer.
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