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.
