Brazil markets slump, worried about Argentine peso
Reuters, Wednesday, May 19, 1999 at 12:43
SAO PAULO, May 19 (Reuters) - Brazil's real, stocks and
Brady bonds slumped by midday Wednesday on local market rumors
of possible changes in neighboring Argentina's currency board
regime which has pegged the Argentine peso to the dollar since
1991, traders said.
The Brazilian real <BRBY> weakened 0.36 percent to 1.672
per dollar before traders broke for lunch, while Sao Paulo's
bluechip stock index (INDEX:$BVSP.X) was down 1.26 percent to 12,113
points.
The country's benchmark foreign bond C-bonds, traded
overseas, slipped 1.5 to 64.75 by midday Brazilian time.
"The dollar strengthened a bit and C-bonds fell under
attack on rumors on Argentina," said one currency trader at
Bozano Simonsen bank. "If Argentine (financial markets) come
under attack, the most liquid market in Latin America -- Brazil
-- would be sold again."
It was not immediately clear where the rumors of currency
pressures in Argentina were originating.
But the Financial Times on Monday quoted Argentina's former
economy minister Domingo Cavallo as saying the country could
float its peso while retaining the currency's convertibility
with the U.S. dollar.
"The market is nervous about analysts' view on Argentina's
economy," added one fund manager at a big international bank.
Under Argentina's current system, one dollar is held in
reserve for every peso in circulation. The peso is also pegged
one-to-one to the dollar since 1991.
Argentine products have become less competitive against the
Brazilian real, since Brazil let its currency float in
mid-January.
saopaulo.newsroom@reuters.com))
Copyright 1999, Reuters News Service
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