Latam currencies weaken

Latin American currencies weakened against the US dollar on Friday as investors cut exposure to Brazil in the wake of new Brazilian taxes on investments and as expectations for economic growth in the United States and Europe flagged. Brazil's real slipped about 0.95 percent to 1.7276 to the dollar the day after the government moved to halt a surge in the real by extending a 6 percent financial transaction tax on foreign loans for up to three years.
President Dilma Rousseff on Thursday blamed a flood of cheap capital in developed countries for the real's more than 8 percent gain against the dollar this year and for declining competitiveness of manufactured exports. Since December, the European Central Bank has provided the region's banks with more than 1 trillion euros of low-interest three-year loans in an effort to break a credit crunch and kick-start growth as concern rose about potential defaults in Greece, Italy, Spain and Portugal.
"If you're an asset manager in London looking around the region for a place to park your cash, Brazil is not really the place where you're going to bet right now, not with Brazil drawing the line on currency appreciation at 1.70 to the dollar," said Diego Donadio, Latin American currency strategist with BNP Paribas in Sao Paulo.
He expects the real to weaken to about 1.74 to the dollar by the end of the month. Other Latin American currencies weakened as enthusiasm eased over cheap ECB loans boosting economic growth. More than three quarters of the money loaned to banks under the three-year ECB program have been put back on deposit with the ECB rather than lent out into the economy.
US purchasing managers and personal consumption data released on Thursday in the US also suggested that the world's largest economy is not growing as quickly as some expected, Donadio said. Mexico's peso weakened 0.6 percent to 12.8008 to the dollar. Mexico gets about 80 percent of its export earnings from the United States.
"Mexico's peso is the currency I'd expect to benefit most under the current situation, but it seems clear that despite all the money flowing around the world economy we might see gains, but also a lot of volatility," he said. Donadio expects the peso to firm to 12.60 by the end of the month and to 11.40 to the dollar by year end. Elsewhere in Latin America, Chile's peso weakened 0.9 percent to 485.65 to the dollar. Colombia's peso weakened 0.4 percent to 1,776.95. Peru's sol weakened 0.02 percent to 2.6745 to the dollar.