Latam currencies gain on Europe relief, US data

RIO DE JANEIRO: Latin American currencies gained on Thursday after Spain took over one of its largest banks and Greece secured bailout funds, easing fears of a flare up in the euro zone debt crisis.

Somewhat encouraging US jobs data also supported investors' appetite for risk as investors jumped back in the market.

Latin American currencies suffered heavy losses in the previous two sessions on growing funding gaps in Spanish banks and the creation of a Greek coalition government opposed to the country's international bailout.

"It's a little bit of a technical rebound after some bad days," said Pedro Tuesta, an analyst at the 4Cast consultancy in Washington.  

Concern over Europe's debt crisis leads investors away from riskier Latin American currencies to safe-haven currencies like the US dollar. Although investor sentiment improved on Thursday, many market participants remained cautious.

"Latin American markets have been suffering with the European problems," said Ramon Cordova, a foreign exchange trader with brokerage Banco BASE in Monterrey, Mexico. "I don't think this recovery will be sustainable if we have another round of bad news."

The Mexican peso gained 0.35 percent to 13.4801 per US dollar, after weakening about 2.7 percent in the past two sessions.

In Brazil, the real rose 0.48 percent to bid 1.9515 per dollar after declining about 2 percent in the previous two sessions. During the nadir of Wednesday trading, the real hit its weakest point since mid-July 2009.

Investors believe the Brazilian central bank is taking advantage of global risk aversion to keep the real above 1.9 per dollar, a level that is likely to boost exports and fuel a faltering economic recovery.

In Brasilia, Finance Minister Guido Mantega said "there is no reason for concern" about a weaker real, which will benefit Brazilian industry. In Rio de Janeiro for a development conference, Brazil's Trade and Industry Minister Fernando Pimentel said the real currently stands "at a good level."

Some analysts interpreted the comments as a signal the government will scale back intervention efforts to reign in the surge of the real.

"The government suggested they may not like the real to weaken so much and so fast," Tuesta added. "The market is taking a cue from that."

Other market players believe the central bank would only act to curb the currency weakening if and when the exchange rate hits two-per-dollar, said Jaime Ferreira, a director with Intercam brokerage in Sao Paulo.

Chile's peso , meanwhile, rose 0.39 percent to 486.20 per dollar, after a recent sell-off triggered by a fall in the price of copper, the country's main export.

"We had good data from the United States and there is talk of political consensus in Greece. That has boosted stocks and commodities," said Rodrigo Sarria, a trader at Celfin Capital in Santiago.