RIO DE JANEIRO: Latin American currencies weakened on Monday as investors feared an escalation of the euro zone financial crisis following a bailout plan for Cyprus that would share losses with bank depositors.
The plan, facing a vote in Cyprus' parliament on Tuesday, includes a tax on bank accounts as part of a 10 billion euro bailout by the European Union. In an attempt to avoid such a tax, Cypriots emptied cash machines over the weekend, raising concerns about the stability of the euro zone banking sector.
"It's just natural that, in an environment like that, investors seek safer assets," said Flavio Serrano, a senior economist with Espirito Santo Investment Bank in Sao Paulo.
The Brazilian real fell 0.2 percent but its losses were cushioned by dollar inflows, traders said.
The Mexican peso lost 0.1 percent but remained more than 3.5 percent stronger in the year-to-date, supported by expectations of market-friendly reforms by the new government of President Enrique Pena Nieto.
"We think that the peso will probably strengthen further over the coming months," Capital Economics' analysts wrote in a research note, forecasting the Mexican currency could hit the level of 12 per dollar later this year.
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