MercoPress. South Atlantic News Agency

Brazil and Mexico sell bank reserves to support currencies

Latin American stocks and currencies fell during another day of volatile trading on Wednesday on fears of a global slowdown. Several central banks had to intervene to cool the demand for US dollars.

Brazil's stock market Ibovespa plunged 5.1% when trading opened, reversed and went into positive territory but then fell again. It was down 1.9% to 39,380. The Real meantime lost as much as 10% against the US dollar before climbing back after the central bank sold1.3 billion in three dollar auctions. It finally stabilized at 2.25 having reached earlier 2.50 to the greenback. In Mexico, the stock exchange was up nearly two-thirds of a percent but the IPC index finally ended 0.99% down at 20.687. However the peso fell as low as 14 pesos but finally stabilized at 12.25 to the US dollars following the announced that the Central Bank would auction 2.5 billion US dollars in reserves to prop up the struggling currency. The first day absorbed almost a billion US dollars, and the rest will be auctioned Thursday, but officials said that 400 million US dollars will be available on a daily basis. Chile's IPSA fell 4,54% to 2.238,66 points and IGPA index lost 3,88% to 10.964,60. In the last five trading days IPSA has lost 21% totalling 26.6% in 2008. Argentina's Merval index ended 1.82% down, with a loss of 15.35% in five trading days. The Merval stood at the end of the day at 1.359,27, the lowest since April 2005. The Argentine peso lost a couple of cents to the US dollar with modest intervention from the central bank. Analysts say the market volatility could devastate Latin America's commodities-based economies. Chile's Codelco is the world's largest copper producer. Peru is the world's largest silver producer and a major supplier of copper, zinc and gold. Brazil, with the region's largest economy, has been hit hardest because its equities were pumped up the most in recent years by foreign investment. Now foreign investors are dumping emerging market positions to reduce their risks.