EMERGING MARKETS-Most Latam currencies weaken; Chilean peso at over 3-mth high

PUBLISHED: Tue, 20 Apr 2021 19:44:31 GMT

* Morgan Stanley, BlackRock bullish on EM * Latam stocks come off two-month high * Mexican peso breaks six-day winning streak (Updates prices) By Ambar Warrick and Susan Mathew April 20 (Reuters) – Most Latin American currencies fell on Tuesday as the dollar strengthened off lows, with falling oil prices knocking currencies of Colombia and Mexico. Chile’s peso, meanwhile, rose 0.5% to a more than three-month high. Copper prices retreated, but stayed near 10-year highs on optimism over recovering global demand. World no. 2 copper exporter Peru’s sol, however, gave up session gains to trade 0.6% lower as concerns about the presidential election remained. It extended losses after posting its worst session in more than five months on Monday when the first opinion poll ahead of a presidential run-off election in June indicated a win for socialist candidate Pedro Castillo. Stocks in Peru sank 5% to touch their lowest since November. As oil prices fell on demand worries, Colombia’s peso lost 0.5%. Mexico’s peso dropped 0.7% after six straight days of gains which took it to three-month highs. Analysts say the currency has prime conditions for carry trades, along with EM peer South Africa’s rand. Sentiment towards emerging market assets, however has been improving, with major investment bank Morgan Stanley going bullish on currencies and bonds, citing stability in U.S. yields. BlackRock, the world’s largest asset manager, espoused a similar stance on Monday. But, Latam markets have lagged their peers due to a damaging COVID-19 resurgence in the region. Brazil’s real erased the day’s gains, falling 0.1%. Amid fiscal worries, the 2021 budget was sent to President Jair Bolsonaro for approval after an initial delay. The rapid spread of COVID-19 in the country has dulled its economic outlook, with the government ramping up spending to what has been perceived as unsustainable levels to offset the pandemic’s economic impact. “The gradual economic recovery continued in February, but the resurgence of the pandemic in March has reversed that trend,” analysts at TS Lombard wrote in a note. “Activity data for retail sales and the services sector showed some resiliency in February, but there is little doubt that this trend was reversed by the virus resurgence in March.” They also expect the Brazilian central bank to hike interest rates steeply in the first half of the year – a move which could support the real. In line with global stocks, Latin American equities retreated, with the MSCI’s index of regional stocks coming off a two-month high. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1344.90 -0.27 MSCI LatAm 2392.59 -0.75 Brazil Bovespa 119999.62 -0.77 Mexico IPC 48517.68 0.93 Chile IPSA 4925.06 -0.91 Argentina MerVal 46800.75 -2.552 Colombia COLCAP 1305.93 -0.51 Currencies Latest Daily % change Brazil real 5.5581 -0.09 Mexico peso 19.9540 -0.71 Chile peso 696.8 0.52 Colombia peso 3641.5 -0.44 Peru sol 3.6897 -0.49 Argentina peso 92.9700 -0.04 (interbank) (Reporting by Ambar Warrick in Bengaluru; editing by Jonathan Oatis and Cynthia Osterman)

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