EMERGING MARKETS-Brazil and Chile currencies sink to 1-month low

(Repeats to additional subscribers)

* Uncertainty over U.S. stimulus hits region’s FX

* Brazil’s real down 0.9 pct, Mexican peso loses 0.7 pct

* Chilean peso weakens 0.6 pct, intervention eyed

* Argentina’s markets rally after Kirchner’s death
(Adds closing prices, comments)

By Samantha Pearson and Caroline Stauffer

SAO PAULO/MEXICO CITY, Oct 27 (BestGrowthStock) – Brazil and
Chile’s currencies sank to their weakest in more than a month
on Wednesday on fears that U.S. stimulus measures may not boost
the countries’ debt markets as much as thought.

Argentina’s credit markets rallied after news that former
Argentine President Nestor Kirchner, the current president’s
husband and a contender to succeed her in next year’s election,
died from a heart attack. His unorthodox economic policies have
long caused resentment among investors.

But most investors kept their eyes on events in the United
States. The U.S. Federal Reserve is likely next week to unveil
a program of U.S. Treasury bond purchases worth a few hundred
billion dollars over several months, the Wall Street Journal
reported on Wednesday. That rattled some investors, who had
envisioned a bigger and more immediate stimulus package.

Investors have been banking on those measures to keep U.S.
yields low and bring a deluge of cash to Latin America’s
higher-yielding bonds.

Brazil is a prime target since its benchmark interest rate
of 10.75 percent is one of the highest in the world.

The Brazilian real (BRBY: ) closed 0.94 percent lower at
1.720 reais per U.S. dollar on the local spot market, hitting
its weakest level since Sept. 23.

“There is some uncertainty over the Fed’s policy next
week,” said Carlos Gandolfo, a partner at Sao Paulo’s Pioneer

Traders were also concerned that fresh measures to curb a
recent rally in the real, which has hurt exporters and the
current account deficit, could be announced after Sunday’s
presidential run-off election.

Graphic on intervention: http://r.reuters.com/kuv79p

Analysis on Brazil’s forex reform: [ID:nN26120199]

However, such measures are likely to have a “limited impact
if they are not accompanied by policies that open the door to a
solution to the fundamental problem caused by Brazil’s high
interest rates,” analysts at IEDI, an industry-funded economic
think tank in Sao Paulo, wrote in a note.

Meanwhile, the Mexican currency (MXN=: ) weakened 0.67
percent to 12.475 per dollar after trading at multi-month highs
earlier this week.

The Chilean peso (CLP=: ) lost 0.63 percent to 494.4 per
dollar, hitting its weakest level since Sept. 22.

While Mexico’s finance minister said the country is not
losing export competitiveness due to recent currency gains, the
situation is very different in Chile. [ID:nN27223162]

A backlash from exporters has put intense pressure on the
government to curb the Chilean peso’s rally. Earlier this week,
Chile announced plans to open capital accounts and relax limits
on investments abroad to curb inflows. But traders are
concerned that more aggressive measures are on their way.


Argentine markets were the exception on an otherwise
downbeat day. The country’s shares and bonds rose sharply after
the death of Kirchner removed from the 2011 election campaign a
contender seen as unfriendly to markets. [ID:nN27233091]

Investors immediately bid higher Argentine credit and
equity-related assets following the news, but volumes were low
due to a local holiday.

“The legacy of the Kirchner Administration clearly reflects
market interventionism and antagonism with the private sector,”
said Siobhan Morden, head of Latin America strategy at RBS
Securities in Stamford, Connecticut.
(Additional reporting by Guillermo Parra Bernal in Sao Paulo;
Editing by Dan Grebler)

EMERGING MARKETS-Brazil and Chile currencies sink to 1-month low