EMERGING MARKETS-Mexican, Colombian FX leads Latam losses as oil rally cools

PUBLISHED: Tue, 16 Feb 2021 19:14:30 GMT

* Citi books profit in South African rand * Real, rand, Chilean peso most undervalued EM FX – Deutsche * Oil prices ease after rally (Adds details, updates prices) By Susan Mathew and Ambar Warrick Feb 16 (Reuters) – Mexican and Colombian currencies dropped on Tuesday as a rally in crude markets appeared to have paused, while most other emerging market currencies looked set to break a seven-day advance as treasury yields and the dollar rose. The dollar moved marginally into positive territory and away from three-week lows, while expectations of U.S. fiscal spending pushed up treasury yields and further pressured emerging market assets. The Mexican and Colombian pesos dropped more than 1% each as oil prices edged away from recent highs, hitting currencies of crude exporting countries. Colombia’s peso retreated from a near one-month high. MSCI’s index of EM currencies lost 0.3%, and was on course to end its longest rally since August. Erasing session gains, South Africa’s rand fell from one-year highs, down 1%, while Turkey’s lira slipped from a six-month peak. Markets in Brazil and Argentina were closed for holidays. Citigroup Inc said it was booking a profit in its three-month bet on the South African rand versus the U.S. dollar. “There is a point at which the underlying very weak growth trend and its fiscal implications could start impacting the ZAR in a negative way,” they said in a note. “Brazilian real, South African rand and the Chilean peso are the three most undervalued EM currencies on an aggregate basis … highlighting that markets have yet to price reflation across EM commodity exporters,” said Deutsche Bank strategists in a note. Meanwhile, losses in Chile’s peso were limited as prices of copper, its main export revenue generator, were boosted by optimism about a global economic recovery. Stocks in Latin America ticked slightly higher on some vaccine optimism. Colombia will begin COVID-19 vaccinations on Wednesday, while Mexico on Monday began the task of vaccinating millions of senior citizens. But concerns over a rocky vaccine rollout in the region, coupled with stretched fiscal spending in major economies has kept Latam assets behind their broader EM peers since the start of the pandemic. Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1440.24 0.18 MSCI LatAm 2420.35 0.18 Mexico IPC 44806.10 1.47 Chile IPSA 4634.96 0.32 Colombia COLCAP 1364.42 -0.36 Currencies Latest Daily % change Mexico peso 20.1630 -1.06 Chile peso 718.7 0.06 Colombia peso 3527.5 -1.09 Peru sol 3.6518 -0.22 (Reporting by Susan Mathew and Ambar Warrick in Bengaluru; Editing by Jane Merriman and Grant McCool)

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