Latam currencies weaken against US dollar

Latin American currencies weakened against the US dollar on Friday amid concerns Greece's political problems will lead to a default and stymie access to credit and growth world-wide. Greek Prime Minister George Papandreou and his government face a confidence vote later on Friday. Should his government fall and new elections be called, a 130-billion-euro ($179 billion) bailout plan agreed last week could be in jeopardy.
In the face of such risks, Mexico's peso has lost more than 10 percent and Brazil's real more than 9 percent in the last three months as investors seek the relative safety of the US dollar, the world's most traded or liquid currency, in favour of riskier emerging market and Latin American currencies. "We believe that Papandreou is in the final stages of his government and we don't see that its sustainable given the quantity of problems that the state has faced," said Gabriel Lozano, senior economist, with Santander in Mexico City.
"The perception of Greece is that it's a little country with very little room to manoeuvre and the ample possibility that it will infect the rest of Europe and eventually the rest of the world." Mexico's peso weakened 1.25 percent to 13.4924 to the dollar, extending weekly losses to nearly 3.6 percent.
After weakening for most of the day, shedding as much 1.14 percent, Brazil's real pared losses to close nearly unchanged from Thursday at 1.7410. For the week the real has lost more 3.5 percent. Chile's peso weakened 0.42 percent to 496.50. If Greece resolves its problems and prevents them undermining bank lending or driving up the cost of debt of countries such as Spain and Italy to unsustainable levels, the peso could firm past 13 to the dollar to about 12.80, Lozano said.
For the moment, it is likely to trade in a "wide" 13.20 to 13.50 range, he added. Elsewhere in Latin America, Colombia's peso weakened 0.34 percent to 1,916.98. Of the world's 36 most-traded currencies against the dollar so far in November, the Colombian peso is the third-biggest loser, shedding 2.31 percent, an amount only beaten by the Lithuanian litas and Hungarian forint. Peru's sol was unchanged from Thursday at 2.7040.
In Argentina, the spread, or difference between the unofficial "parallel" or "blue chip" rate offered by currency exchange houses and the official, interbank rate heavily controlled by the central bank held near all-time highs at 41 centavos, two centavos less than on Thursday. The high spread - a month ago it was 23 centavos - reflects rising demand for dollars as inflation, likely double the 9.9 percent official rate, erodes the value of assets and the government signals that it may move to weaken the peso to help exporters and protect local manufacturers.
As the government seeks to increase control of the currency, the spread shows the willingness of Argentine companies and individuals to accept about 10 percent less for their pesos on the less regulated informal market than on the formal market at the official rate. The parallel peso was unchanged from Thursday at 4.66 to the dollar, the official rate was little changed from Thursday, firming 0.12 percent to 4.2525.