Mexico intervenes on peso's behalf; Brazil climbs
By Carla Mozee, MarketWatch
Last update: 4:03 p.m. EST Feb. 4, 2009
LOS ANGELES (MarketWatch) - Brazilian equities climbed Wednesday after the government said it will boost infrastructure spending through next year, while attention turned to action in Mexico's currency after the country's central bank intervened to stem a sharp decline in the peso.
Mexico's central bank stepped in to sell U.S. dollars on the spot market as the peso dropped to a record low of 14.75 pesos against the greenback. The peso has been hurt in recent months with demand for Mexican products weakened as its largest trading partner, the U.S., suffers in recession.
The U.S. purchases more than 80% of Mexico's products.
The peso dropped to the low level in "a matter of ten minutes," said Win Thin, senior currency strategist at Brown Brothers Harriman.
"No central bank likes to see that kind of move in their currency," he said, noting that the pesos bounced back to the 14.40 level after intervention.
"They know that the market is very negative on emerging markets. There's nothing they can do about it. But they are trying to smooth the move and it adds a two-way pricing...and restores a little order."
Among equities, Mexico's IPC index fell 0.1% to 19,603.92. Banking stocks were mixed, with Banorte (MX:GFNORTEO: news , chart , profile ) down 0.6% while Inbursa gained 1%.
Brazil's Bovespa rose 1% to 40,129.04, aided by advances in steel stocks after the government raised its infrastructure projects spending plan, known as PAC, by 142.1 billion reals ($61.3 billion) to 646 billion reals.
The program runs through 2010. It was originally unveiled in 2007 and is aimed at fixing and building roads, bridges, electricity dams and other items.
President Luiz Inacio Lula da Silva on Tuesday said he expected the economy to retract in the first quarter amid "rough" conditions.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles.