MEXICO CITY: Latin American currencies lost steam on Wednesday as disappointing economic data out of Europe and the United States dulled investor enthusiasm for higher-risk assets.
The Brazilian real and the Mexican peso both edged lower as data showed the euro zone economy contracted for a sixth straight quarter while France slid into recession.
In the United States, where signs of recovery have fueled expectations that the Federal Reserve may wind down its asset purchase program by year-end, data showed manufacturing activity in New York state contracted unexpectedly in May.
"All the data today point to global growth not being so dynamic. We'll have to see how Mexico's first-quarter GDP comes out on Friday," said Luis de Urquijo, a strategist at the Compass Group in Mexico City.
The peso dipped 0.06 percent to trade at 12.208 per dollar after touching a three-week low earlier in the day, and marking its fifth consecutive session of losses.
Nonetheless, Mexico's currency is up more that 5 percent against the dollar so far this year, amid market optimism about a raft of structural reforms that newly-elected President Enrique Pena Nieto has been steering through Congress.
Still, analysts expect the Mexican economy likely shrank in early 2013, marking the first quarter-on-quarter contraction since a deep recession in 2009, and giving central bankers more reasons to cut benchmark borrowing costs later this year.
The Brazilian real , meanwhile, dipped 0.13 percent to close at 2.02 per dollar, fueling speculation among investors of a possible Central Bank intervention. The last such move took place when the real traded at about 2.03 per dollar.
"The market is working with that and is moving into high alert," said Italo dos Santos, the manager of Exchange Broker Icap. He stressed, however, that he does not predict a central bank intervention at the 2.03 reais per dollar level, but expects markets to next test the 2.05-per-dollar level.
The last time the central bank entered the foreign exchange market was in late March.
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