Latam currencies weaken sharply

Latin American currencies weakened sharply on Friday as efforts to secure a Greek bailout faltered and Brazil's real and Mexico's peso headed to their first weekly loss this year. Dimming hopes for a speedy solution in Greece, and what some analyst see as a too fast, too sharp rally, have made the currencies ripe for a pullback.
There could be more profit taking next week given signs Europe is struggling to agree on terms for a second bailout deal for Greece. "The fear is that Greece is not going to come to a solution," said Rafael Camarena, an economist at Santander in Mexico City. The real dipped 0.41 percent to bid at 1.7260 per US dollar, pulling further away from the key 1.70-level that many think the central bank and government may try to defend with more intervention or capital controls. The Mexican peso lost 1.07 percent to 12.815 per dollar.
"It's not surprising that we are seeing this weakness, it's expected," said Mauro Roca, an emerging markets strategist at Deutsche Bank in New York. "The question going forward is going to be how long is it going to take for a solution. Then we will have more solid ground for a sustained rally." Currencies depreciated against the dollar after a far-right Greek leader refused to back an EU/IMF bailout package needed to avert a messy default that could harm global financial markets.
A Greek news agency reported shortly after the announcement the leader had offered to resign, calming markets slightly. Both the real and the peso which have gained 7.5 percent and 8.4 percent this year respectively, are heading to their first weekly loss after surging in the first five weeks of the year and posting their strongest period since the rebound from the global credit crisis in early 2009.
Emerging markets rallied this year on improved economic data in China and the United States, key Latin American trading partners, and renewed hope that the euro zone debt crisis could be stabilising. Euro zone officials say a bailout package must be agreed with Greece and approved by the European Union, the International Monetary Fund and European Central Bank by February 15 to avoid a chaotic default that may threaten the global economic recovery. Chile's peso bid 0.56 percent weaker to end at 477.00 per dollar, after hitting a five-month high during the last session.