Latin American currencies will follow the evolution of the crisis in the euro zone this week, with occasional drops in case of a worsening situation in the absence of decisive action to end the fiscal problems.
The sovereign debt crisis in Europe has dominated the markets in recent weeks, but lately emerged speculation that the European Central Bank (ECB) could lend money to the International Monetary Fund (IMF) to help European economies in trouble.
The triumph of the right in general elections in Spain on Sunday did not reverse the low morale in the euro zone, where the common currency continued its downward streak and yield spreads of Spanish and Italian debt versus German benchmark bond following his climbing .
As in other emerging market currencies, the Brazilian real, the largest economy in Latin America, will also be captivated by the developments in Europe in the week.
Win Thin, global head of emerging markets at Brown Brothers Harriman, says that the real can be lowered by the worsening crisis in the euro area.
“We expect a lower yield of the real within the emerging markets by year-end aim. Due to our negative outlook on the euro zone crisis, we remain defensive about real and we see further weakness towards the end of the year,” said .
On Friday, the real depreciated slightly to close at 1.7823 / 1.7830 per dollar in the interbank market.
Meanwhile, the Peruvian sol could operate with a slight downward correction after last week traded at its highest level in over three years and a half to 2.699 / 2.700 per dollar.
“We will again be correlated with foreign markets and we could see a rebound in the exchange rate if things continue to complicate the eurozone,” said Gonzalo Navarro, treasury executive at Banco Santander in Peru.
The Peruvian currency closed on Friday up 0.04 percent to 2.699 / 2.701 per dollar, its highest level since April 8, 2008.
The rise of the Peruvian currency occurred last week by a strong supply of dollars of local mining companies sued soles to pay taxes and banks reduced their long dollar positions amid a global low dollar .
To lessen the strength of the local currency, the central bank bought dollars this week in the foreign exchange market around 2.70 soles per dollar.
The global uncertainty also affects the Chilean market, where analysts focused local weight changes in what happens in Europe.
“What happens to the exchange rate will continue to be subject to Europe. Now attention is focused on the meeting to be the new Italian Prime Minister with his peers in Germany and France,” a trader said.
“Amid this uncertainty, the exchange rate should be kept above 500 pesos (per dollar) in a range that could range from 506 to 514 pesos, depending on the evolution that has the debt crisis of the euro area, “he said.
The spot exchange rate fell 0.14 percent on Friday to end at 510.70 pesos and 511.00 pesos buyer seller.
So far in 2011, the weight is down from a 8.42 percent against the dollar, compared with an appreciation of 8.4 percent recorded last year.
The Mexican peso will depreciate down this week following Friday at 13.7376/13.7406 per dollar.
“We will continue to see this behavior of pressure and weight, as it has been very slow the political process is needed to jump-start the fiscal adjustment in countries with more problems, which are Greece and Italy,” said Miguel Angel Flores , deputy director of public bank Bansefi analysis in Mexico City.
“I think this upward trend in the exchange rate will be maintained slow but upward. I think we’d be seeing a consolidation of operations level above 13.70, except that news would not like the market, which they could shoot 13.80 above, “he said.
In Colombia, analysts estimate that the weight would fluctuate between 1,889 and 1,923 per dollar.
“We have a choice in the region, although the fundamentals are for revaluation of the currencies of foreign investment income flows and also motivated by interest rate differentials against the (countries) developed, we are subject to international volatility and Europe U.S. somehow, “said Laura Orellano, currency analyst at brokerage Shares and Securities.
For its part, the Argentine peso will continue to operate within a small square in business to recent government measures that seek to discourage the purchase of foreign exchange.
Businesses in the interbank segment, which operates the Central Bank regulation of business liquidity reserves, the weight will remain stable at around 4.255 / 4.2575 per dollar.
In late October, in order to discourage foreign exchange and curb capital flight, the Government decided that the dollar purchases must be authorized in advance by the tax office (AFIP), among other measures.
Category: Business News