RIO DE JANEIRO: Latin American currencies rose in synch with US stock markets on Tuesday, but investors remained cautious after US Federal Reserve chief Ben Bernanke refrained from hinting at fresh stimulus measures that could boost the flow of dollars to emerging economies.
The Mexican peso and the Brazilian real initially inched lower as Bernanke repeated that Fed policymakers are ready to act if the economy deteriorates further, but didn't signal any immediate action.
Gains on Wall Street encouraged some investors to buy Latin American currencies later in the session, driving both currencies nearly half a percentage point higher.
The real last traded at 2.0245 per dollar, back to the center of a narrow range of 2.00-2.05 per dollar it has been trading for the past two weeks, under the threat of central bank intervention.
"Our market is increasingly less volatile as it knows the central bank will intervene (to strengthen the currency) around 2.10 reais per dollar, and that the government doesn't want a real weaker than 2 per dollar," said Luiz Fernando Genova, a trader with Daycoval bank in Sao Paulo.
The Mexican peso traded at 13.1705, its strongest level since the beginning of May, while the Chilean peso ended with gains of 0.14 percent at 489.80 per greenback, its strongest in two months.
Investors will likely remain on edge, however, as they watch the second part of Bernanke's congressional testimony on Wednesday. In the first leg of his testimony, the Fed chief underscored his concerns over the weakness of the US economy, which was interpreted by some investors as keeping the door open to further stimulus measures later this year.
Those who were expecting that the recent deterioration of the US economy would warrant imminent action from the Fed were frustrated, however.
"The truth is that Bernanke's words were disappointing. He made it clear the Fed will not take any action for now," said Mario Battistel, manager at the currency desk of Fair brokerage in Sao Paulo.
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