EMERGING MARKETS-Latam currencies firm, conviction seen weak

* Mexico peso firms 0.59 pct, Chile peso up 0.33 pct

* Investors seem to rule out deepening EU debt crisis

* Brazil real up 0.18 pct as intervention eyed

By Michael O’Boyle

MEXICO CITY, March 24 (Reuters) – Key Latin American
currencies firmed on Thursday, supported by a weaker dollar and
rising stock markets, but analysts noted a lack of conviction
behind the gains amid a host of global risks.

Brazil’s real hit a two-week high, while Mexico and Chile’s
pesos traded at their strongest in more than a week.

Demand for riskier assets like stocks and emerging market
currencies rose despite worries about the ongoing violence in
the oil-producing Middle East, fears that Portugal will need a
bailout and concerns about Japan’s nuclear crisis.

The cascade of the negative global events had slammed Latin
American assets this month.

“The market took a breath over the last couple of weeks,
the global backdrop deteriorated, but it hasn’t changed
significantly, so investors are willing to put some money to
work,” said David Beker, head Latin American

“But I wouldn’t say these investors have a strong hand,
people are willing to put on short-term positions, but not
medium- or long-term positions,” he added.

Japan’s disasters could end up weighing down global growth,
as could a sustained spike in oil prices or the expansion of
Europe’s debt crisis to a major economy like Spain.

Global investors have been taking advantage of recent
declines in Latin American currencies on global jitters to
place fresh bets on the region’s high-yielding debt.

Latin American currencies could see support from high
prices for local commodities, like Chile’s copper and Brazil’s
iron and soy, while expectations of further interest rate hikes
will tempt global investors with higher yields.

“Latin America has high commodity prices and these guys are
more willing to hike interest rates,” said Win Thin, an
emerging markets strategist at Brown Brothers Harriman in New

Mexico and Colombia are oil exporters while Brazil is
energy self-sufficient, so they may be able to better weather
higher oil prices than Asia, where most countries import, Thin

While intervention in Brazil could limit gains, Mexico and
Chile may be poised to advance further.

Mexico’s peso (MXN=: Quote, Profile, Research)(MEX01: Quote, Profile, Research) firmed 0.59 percent to 11.9480,
edging past the psychological 11.95 level, which could open the
field for a run toward its nearly 2-1/2 year high hit earlier
this month at 11.8585.

Local banks exercised $200 million in dollar put options on
Thursday, exhausting the last of the $600 million a month sold
by the central bank.

Outstanding options can help contain the peso’s gains, but
with the monthly allotment used up, the currency will find less
resistance to advance in the coming sessions.

Chile’s peso (CLP=CL: Quote, Profile, Research) bid 0.33 percent stronger to 479.70
per dollar.

Chile imports most of its crude, but strong copper prices
can help offset the impact of higher oil costs, analysts said.
Chile is the world’s top copper producer.

Brazil’s real (BRBY: Quote, Profile, Research) firmed 0.18 percent to 1.656 per
dollar, gaining ground for the fifth straight session and
trading at its strongest since March 9.

The real is than 1 percent from a 2-1/2 year high hit
earlier this month that stirred concerns of fresh moves by
authorities to tame the real’s strength, which is hurting local

Traders said the market was cautiously pushing the real
stronger amid expectations that new measures could be
(Additional reporting by Jose de Castro in Sao Paulo, Editing
by Diane Craft)

EMERGING MARKETS-Latam currencies firm, conviction seen weak