brazilian real

emerging markets-latam currencies dip on caution ahead of fed

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latin american currencies
dipped in cautious trading on wednesday before a much-awaited
statement from the u.s. federal reserve which may unveil
additional monetary stimulus to support the u.s. economy.
the brazilian realĀ  was 0.1 percent weaker while
the mexican peso dropped 0.2 percent as investors avoided
taking large positions before the end of the fed's two-day
monetary policy meeting at 1630 gmt.


expectations that u.s. policymakers could extend their
current operation twist program designed to lower long-term
interest rates, or even launch a third round of
quantitative-easing measures, triggered a rally in latin
american currencies and stocks on tuesday.
part of the liquidity provided by the fed's easy-money
policies often finds its way into emerging markets, which offer
higher interest rates.
"markets are trading today on the expectation that the fed
will do something to help the economy," said flavio serrano, a
senior economist with bes investimento in sao paulo.
"and by 'something' i mean 'anything' - extending operation
twist, or a fresh round of quantitative easing, or even
signaling that the door is open to new stimulus measures if
necessary," he added.
meanwhile, brazil's interest-rate futures rose on bets
brazil's state-led oil giant petrobras could soon
raise fuel prices to pay for its latest business plan.

higher gasoline prices could have an impact on brazil's
inflation, hampering the ability of the central bank to keep
cutting interest rates.
brazil's interest-rate contracts maturing in january 2013
, the most traded this session, paid a yield of 7.74
percent, compared to tuesday's adjusted close of 7.71 percent.

to read more go to reuters.com