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LATAM currencies feel the global credit squeeze
Thu, Oct 9 2008, 10:10 GMT
by Lars Rasmussen
LATAM currencies have weakened sharply over the past couple of months amid the global credit squeeze. Since August 1, 2008 the Brazilian real (BRL) has fallen almost 50% against USD and roughly 30% against EUR. Over the same period the Mexican peso (MXN) dropped almost 25% vs. USD and 9% vs. EUR. Further, most LATAM currencies came under heavy pressure yesterday in a very thin market as rumours apparently spread that several large US banks would exit Mexican markets.
As the US markets opened, BRL and especially MXN began to weaken very sharply. USD/BRL jumped from roughly 2.30 to 2.45 - about a 5% shift - while USD/MXN rose massively from 12.60 to 14.30, or 13.5% in less than one hour. These movements forced central banks to intervene to support the currencies. Brazil's central bank (BCB) intervened four times by selling USD from its FX reserves, which brought some relief. During yesterday's trading session BRL and MXN rebounded to pre-opening levels against USD. Currently USD/BRL stands at 2.31 and USD/MXN is hovering around 12.27.
Published on Thu, Oct 9 2008, 10:13 GMT
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This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.Related reports
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