Emerging Markets

Mexico. The Mexican CB announced they were going to pare back the sales of longer term bonds (in excess of 10 years) and increase the supply of shorter end bill auctions in an effort to increase liquidity. Interest rates fell aggressively.

The government also plans to borrow as much as an additional $5 billion from multilateral lenders by 2009 because the financing terms are ``particularly attractive in current market conditions,'' the ministry and central bank said.

Brazil. The Bovespa dropped below 30,000 for the first time in 3 years. This is occurring because of a weakening economy and talk that many local corporations have large derivatives losses sitting on their books. With less credit around and commodity prices falling Latin America is a prime area to sustain considerable losses. The CB has been in providing liquidity to both the spot and short date market. This has clearly helped, but when they stop this aggressive intervention I think the upside for this currency pair is substantial.

Argentina. Argentine lawmakers are set to begin debate on President Kirchner's proposal to nationalize the pension plans of the country. This was done in an effort to bridge the gap in financing the Government needs to continue paying their debt. Without this it is feared that Argentina will suffer a second debt default in the last 7 years. The market doesn't like this move and has driven their debt market to default levels. The currency has been weakening steadily the last few days and implied interest rates are over 100%. All in all this is a currency to stay away from.

Trades.

Long Usd/Brl and Usd/Mxn. If it not for intervention from the Central Banks these currency pairs would be higher. I think eventually we will in that direction.

Euro. I am totally square here but something is telling me to get long. I will not though, as I tend to trade this currency pair very poorly. I will however try and "scape" a few points during the day by attacking it from the long side.

Good Luck and Good Currency Trading.