Latam currencies steady

Brazil's real and Mexico's peso held steady on Friday against the dollar, hanging on to gains after a three-week rally in Latin American currencies, as investors avoided making bets until Greece and its creditors agree to debt-reduction terms. Creditors are being asked to forgive as much as 70 percent of their loans to the Greek government. Failure to win agreement on debt forgiveness could lead to a Greek default and subsequent bank failures that could curb credit and growth world-wide.
Mexico's peso traded at a bid price of 13.2285 to the dollar, 0.2 percent weaker than on Thursday. Brazil's real weakened 0.24 percent to 1.7583. In recent weeks, easing concern about European debt caused Latin American currencies to gain after a sell-off during 2011.
The Colombian peso, Chilean peso Brazilian real and Mexican peso are the first-, second-, third- and fifth-biggest gainers, respectively, so far in 2012 among the 152 currencies tracked by Thomson Reuters against the dollar. All have gained between 5 percent and 6 percent.
"A lot of the optimism about Europe that is behind the Latin American rally has turned to a bit of nervousness as Greece negotiates with its creditors," said Kathy Lien, currency strategist at GFT Forex, a New York brokerage. "People are holding off ahead of an announcement from Greece because if there is no agreement, the conditions that helped the currencies rise will disappear," she said.
Colombia's peso weakened slightly, shedding 0.14 percent to 1,8324.00 per dollar. Of the major Latin American currencies, only the Chilean peso showed clear losses, dropping 0.43 percent to 492.10. Chile's declines came as copper, responsible for more than half of the country's export earnings, fell for the first day in five. Copper for delivery in three months fell 1.45 percent to $8,219.85 a tonne in London. Peru's sol was little changed from Thursday shedding 0.04 percent to 2.6910 to the dollar after the central bank sold pesos to buy $114 million of US currency.
Even if Greece and its creditors reach an agreement, Lien believes that the rally in Latin American currencies is probably close to over. The Mexican peso may gain a bit more to about 13 per dollar, but will not gain beyond that in the near term, she said. Brazil's real is likely to rise to about 1.75 per dollar, but little further in the coming weeks, she added.