Thursday, June 19, 2008

Latan American Rates ready to go higher.

There seems to be alot going on in the Latin American markets the last few days....Here is a recap.

Argentina. Last week there were no bids in sight. This week just the opposite. Although the spot does not move higher (Manipulation anyone?) the rate differential has increased tremendously. Argentinian rates have moved from 10.5% to 15.5% (implied through NDF's) in the last three days. The key to watch is the spot. If it begins to move up and the Central Bank doesn't step in to keep it lower, this could be a blood bath (with yours truely right in the middle).

Mexico: Rate announcement is due out on Friday. The market expects no change but look for the Central Bank to switch its statement from one of caoutioning about slow growth to fighting inflation. This will begin to prepare the market for rate increases which will be coming down the road.

Brazil: The CB came out today and stressed that inflation problem and the need to do something about it. The Article on BLOOMBERG really lays it out for everyone.

``The central bank is alert and ready to act,'' Meirelles, 62, said today in a Bloomberg Television interview in Sao Paulo.

Meirelles said he sees the need to cool consumer spending in Brazil after the annual inflation rate climbed to 5.58 percent in May, the fastest since January 2006, fueled by rising food costs. Policy makers raised the so-called Selic rate twice this year to 12.25 percent, saying an expanding economy may stoke inflation

No one should be surprised by the increase in rates that is sure to come.

Chile and Colombia: Their currencies have been strengthening quite a bit of late all on the promis of higher rates. Chile raised rates unexpectedly a week ago and Colombia went last week also. There is no reason to believe that those will be the last.

Good Luck and Good Currency Trading.



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