Latin America's currencies weakened on Friday after China reported its slowest first-quarter growth in three years and euro zone concerns lingered as Spain's borrowing costs continued to rise. China's annual rate of GDP growth fell below market expectations, slowing during the first three months of the year to 8.1 percent, compared with 8.9 percent in the previous quarter.
Investors are keenly looking for clear signals of whether China can avoid a so-called hard landing that would harm exports from commodity-dependent Latin America. "Hard landing looks less likely, soft landing looks probable but the lesson for Latin America is the commodities boost from China has probably peaked," said Neil Shearing, an economist at London-based Capital Economics.
China, the world's second-largest economy, is a key customer of the region's raw material exports such as iron ore, soybeans and copper. Currencies in Brazil, Chile, and Mexico were all on track to post weekly losses as euro zone debt worries resurfaced this week and concerns rose about the global growth outlook.
Brazil's real slipped 0.5 percent against the dollar to close at 1.8385, losing about 1 percent this week. The Brazilian central bank called an auction to buy dollars on Friday as part of its effort to build up reserves and limit volatility in the currency. It was the third consecutive day the bank has waded into the currency market.
Further weighing on Latin American currencies is the threat of a possible Spanish bailout, much like that of Greece. Spain and Italy have become a focal point of a European debt crisis that the market had largely brushed off in the first quarter as pressures in the region eased. Spanish 10-year bond yields rose and the cost of insuring Spanish debt against default hit 500 basis points for the first time, as record borrowing by the country's banks from the European Central Bank underscored fears about its finances.
"Everyone is nervous after the bad data coming out of China and diminishing consumer confidence in the United States and Spain," said Cesar Elizalde, a currency trader at Banorte-IXE in Mexico City. "The topic of Spain is enormous with people beginning to leave riskier assets for safe havens." Mexico's peso weakened 1.1 percent to 13.170 per dollar. An index of US consumer sentiment fell modestly in early April as higher gasoline prices hit household budgets, adding to pressure on the Mexican currency.
The Mexican peso is heavily influenced by the US economy, where it sends nearly 80 percent of its exports. Elizalde said losses to 13.20 over several days could mean a change in tendency for the peso. The currency has lost about 2.8 percent so far this month - the worst performer among regional currencies. The Chilean peso lost 0.6 percent on Friday to close at 484.7 per dollar as the price for the country's key export, copper, fell nearly 3 percent. Chile's peso weakened 0.2 percent in the week.
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