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EMERGING MARKETS-Latam currencies rally as U.S. fiscal deal announced

RIO DE JANEIRO, Oct 16 (Reuters) - Latin American currencies

rallied on Wednesday as U.S. Senate leaders announced a

bipartisan deal to raise the government debt ceiling and avert a

historic default.

The Brazilian real climbed more than 1 percent

to as much as 2.1551 per dollar, its strongest intraday level in

four months, as congressional aides said the U.S. House of

Representatives and the Senate are expected to approve the deal

later on Wednesday.

That would clear the way for President Barack Obama to sign

the bill into law before Thursday, when the U.S. Treasury says

it will exhaust its ability to issue debt.

The Mexican peso rose 0.9 percent, while the Chilean

peso climbed 0.6 percent, as an imminent resolution to

the U.S. fiscal impasse boosted investors' appetite for risk in

general. A U.S. debt default would have roiled markets across

the globe.

However, the tide could soon turn against emerging market

currencies when markets start to focus on the timing of an

expected withdrawal of U.S. stimulus measures, analysts warned.

"We believe that the eventual resolution to the U.S. debt

crisis will provide a further near-term boost to emerging market

currencies," strategists with Brown Brothers Harriman wrote in a

research note.

"While uncertainty about Fed tapering will likely return to

the spotlight at some point, we look for a potential period of

emerging market gains after U.S. fiscal policy risks have been

mitigated," they added.

Expectations that the U.S. Federal Reserve would delay the

tapering of its bond buying program into 2014 had been growing

in the past few weeks as the U.S. fiscal crisis added

uncertainty to the performance of the U.S. economy.

Latin America FX prices at 1745 GMT:

Currencies daily % YTD %

change change


Brazil real 2.1608 0.83 -5.59

Mexico peso 12.8730 0.90 -0.07

Chile peso 495.7000 0.61 -3.43

Colombia peso 1883.4000 -0.03 -6.23

Peru sol 2.7590 0.36 -7.54

Argentina peso 5.8400 0.00 -15.88

Argentina peso 9.7000 -1.03 -30.10