By Jeb Blount
RIO DE JANEIRO (Reuters) – Mexico’s peso rose against the U.S. dollar for a third day, leading gains among Latin American currencies, as emerging market investments got a boost from stabilizing commodities prices.
The Mexican peso rose 0.3 percent on Thursday to 11.6637 to the dollar. In early trading it firmed as much as 0.55 percent to 11.6356 its strongest intraday price in five sessions.
“We’re seeing a departure from the risk-reduction cycle that is prompting investors to take advantage of risk currencies such as Mexico,” said Mike Moran, Latin American economist with Standard Chartered Bank in New York. “Market risk and commodities have stabilized in the last several weeks.”
After reaching its lowest level in almost four months on Friday, the Thomson Reuters/Jefferies index of crude oil, copper, soybeans and 16 other commodities has jumped as much as 3.7 percent.
The weekly correlation between Mexico’s peso and the Thomson Reuters/Jefferies CRB index, a measure of the relationship between Mexico’s currency and commodities prices, is 0.75. Any correlation number above 0.6 is considered a ”strong” relationship.
Most Latin American countries are major commodities exporters. Brazil is the largest producer of coffee, sugar and orange juice and second-largest producer or iron-ore and soybeans. Chile gets more than a third of export earnings from copper.
Chile’s peso gained 0.02 percent to 469.10 per dollar after strengthening as much 0.54 percent to 466.69. Colombia’s peso firmed 0.04 percent to 1,816.20 to the dollar after rising as much as 0.3 percent to 1,812.
“In the end all the region’s currencies are ultimately correlated to commodities prices,” Moran said.
Mexico’s peso and other Latin American currencies may also be getting a boost from U.S. economic data that shows that job creation in the U.S. remains sluggish and that economic activity in the U.S. northeast, the country’s richest and most industrialized region, slowed.
The data suggests that interest rate increases in the United States, the world’s largest economy may, may be delayed well into 2012, said Alfredo Puig, a trader at Vector, a Mexico City securities brokerage.
Near-zero interest rates in the United States, part of efforts to revive the economy after the 2008 banking crisis and 2009 world recession, have helped finance a surge in world commodities prices and financed large bets emerging markets currencies will rise.
Emerging market risk as measured by JPMorgan’s EMBI+ index backed the outlook for rising interest in Latin America.
The index, which measures the interest premium demanded by investors to buy an emerging market bond instead of a comparable term U.S. Treasury bond, fell 4 basis points to 272, or 2.72 percentage points.
Brazil’s real traded mixed, weakening 0.37 percent to 1.616 to the dollar after firming in early trading as much as 0.19 percent to 1.607, its strongest intraday level in more than a week.
Peru’s sol was little changed from Wednesday strengthening 0.01 percent to 2.7526 to the dollar.
Category: Business News