Most Latin American currencies weakened against the US dollar on Friday as concern Greece will default on its debts led investors to sell emerging-market assets. Non-dollar assets fell or weakened world-wide on concern the Greek parliament may reject a package of spending cuts, tax increases and state-asset sales next week.
The European Union and International Monetary Fund have said they will not give Greece new bailout cash needed in July to prevent a default on 340 billion euros ($481 billion) of debt. "All the news that is coming out about Greece's debt is having an impact directly on the peso as well as on other emerging market exchange rates," said Enrique Trejo, head of currency trading at IXE, a Mexico City brokerage.
The Mexican peso weakened 0.2 percent to 11.8827 to the dollar. Despite declines Friday, the peso is set to close the week narrowly stronger against the dollar. The peso may weaken further, slipping to about 12 to the dollar before investors start buying the Mexican currency again, he said. Brazil's real slipped 0.7 percent from Wednesday, the last day of trading to 1.598, little changed from last Friday.
The real's weakening was aided by the closure of Brazilian markets yesterday, said Jorge Knauer, treasurer of Banco Prosper in Rio de Janeiro. Brazil's benchmark interest rate of 12.25 percent is keeping money flowing to the real instead of the dollar, the traditional safe-haven currency, because US rates are near zero.
Indeed, speculative bets by foreign investors that Brazil's real will gain against the dollar reached a record high this week on Sao Paulo's BM&F commodities and futures exchange. The net notional value of these bets on the real rose to $20.89 billion on Wednesday, 0.1 percent more than Tuesday's $20.86 billion, the previous record, according to the BM&F Web site and Reuters.
Colombia's peso slipped 0.1 percent to 1,784.70 to the dollar, about 0.4 percent stronger than a week ago. Peru's sol was unchanged from Thursday at 2.7580 and little changed from a week-ago Friday. The region's currencies are also heavily influenced by commodities. Brazil is the world's largest producer of coffee, sugar and orange juice, the second largest producer of iron-ore and soybeans and a large oil producer. Colombia is a major producer of coffee and large producer of oil.
The dollar index, which measures the value of the US currency against the euro, yen and a basket of other developed world currencies, rose for a third day adding 0.1 percent to 75.541. The Reuters/Jefferies CRB index of 19 key energy and agricultural commodities fell 0.4 percent to 328.89, close to some of its lowest levels since January. On Thursday it fell 2.3 percent, its biggest decline in more than a week. One commodity avoiding the decline was copper, which gained 1.1 percent to $9,059 a tonne in London.
Chile's peso gained 0.1 percent to 473.80 to the dollar. It remains weaker than its 100-day moving average for a second day. It slid below the average for the first time since March on Thursday. Chile, the world's largest copper producer, gets more than a third of its export earnings from the reddish metal, a key component in electrical and electronic equipment.