Latin American currencies firmed on Friday on hopes US central bankers may provide more stimulus to the US economy, while Mexican bonds rallied after the central bank said it could cut interest rates. Ben Bernanke, chairman of the Federal Reserve, said co-ordinated action by the government was needed to lift an economy that has proven "much less robust" than expected.
In a speech in Jackson Hole, Wyoming, Bernanke said the Fed's policy-setting Federal Open Market Committee would extend its September meeting to two days from one day to discuss options for stimulus. Riskier assets like stocks and emerging market currencies initially declined on Bernanke's failure to promise specific measures.
Mexico's peso gained 0.36 percent to 12.4705 to the dollar. Brazil's real bid 0.4 percent stronger to 1.6031 to the dollar. Chile's peso gained 0.28 percent to 465.50 per dollar. Latin American currencies slumped this month on fears of a US recession and worries that Europe's debt crisis is widening. Mexico's peso has lost about 6 percent, on track to post its worst month in more than two years, while Brazil's real has shed more than 3 percent.
The bleak global economic outlook is pushing Latin America's central banks to wind down a cycle of raising borrowing costs and some are starting to mull interest rate cuts instead. Mexican bonds rallied on the news. The government benchmark 10-year peso bond rose 1.827 points in price to 105.521, pushing down its yield 24 basis points to 5.92 percent. Central Bank Governor Agustin Carstens said on Friday that Mexico's central bank has moved into neutral gear and sees no need to cut interest rates.