April 24, 2018 / 3:41 PM / a month ago

EMERGING MARKETS-LatAm currencies rebound after selloff, except Brazil

    By Bruno Federowski
    BRASILIA, April 24 (Reuters) - Most Latin American
currencies bounced back on Tuesday from a sell-off as U.S. bond
yields steadied, but political uncertainty drove the Brazilian
real to its weakest level in 16 months.
    Emerging market currencies had plummeted on Monday as U.S.
Treasury yields shot up to a four-year high, lifted by
expectations of a wider fiscal deficit and faster inflation.
    After briefly breaching the 3 percent milestone early on
Tuesday, yields on 10-year U.S. bonds retraced some
of those gains, rekindling appetite for battered high-yield
assets.
    The Chilean peso firmed 0.4 percent, also supported
by rising prices of copper. The Mexican and Colombian
pesos, which had led losses on Monday on the heels of a
crude sell-off, strengthened 0.5 percent and 1 percent
respectively as oil futures rose above $75 a barrel.

    Yet analysts at Guide Investimentos cast doubt over the
rebound, saying an uncertain outlook is likely to keep
volatility high in coming days.
    "This might be a one-off, transitory recovery in asset
prices," they wrote in a client note.
    The Brazilian real weakened 0.8 percent, extending a
recent stretch of underperformance as traders fretted over the
most uncertain presidential election in decades.
    Some investors had predicted that the arrest of former
President Luiz Inácio Lula da Silva, who was leading polls and
had rallied against the current government's austerity platform,
would usher in the ascent of more market-friendly candidates.
    But recent polls have showed the Brazilian electorate highly
fragmented and unsatisfied with the likely candidates in the
October election, raising doubts over efforts to curb a growing
budget deficit.
    "Our bullish story was mostly based on (recovering)
confidence ... but the election process is not moving in the
expected direction," strategists at Santander wrote in a client
note.
    The benchmark Bovespa stock index, however, rose 0.3
percent, with shares of Banco Santander Brasil SA
and Cosan SA Indústria e Comércio leading gains.
    Cosan shares rallied after Raízen Combustíveis SA, a joint
venture between Cosan and Royal Dutch Shell Plc, agreed
to purchase downstream assets in Argentina from Shell for $950
million.
    Meanwhile, traders bet Santander Brasil will report
stronger-than-expected results later on Tuesday after Spanish
parent company Banco Santander SA unveiled a 10 percent
rise in first-quarter net income.
    
    Key Latin American stock indexes and currencies at 1525 GMT:
 Stock indexes                             daily %    YTD %
                                 Latest     change   change
 MSCI Emerging Markets           1155.38     -0.25    -0.02
                                                    
 MSCI LatAm                      2987.20     -0.72     6.39
                                                    
 Brazil Bovespa                 85858.36       0.3    12.38
                                                    
 Mexico IPC                     48135.47     -0.63    -2.47
                                                    
 Chile IPSA                      5691.58     -0.23     2.28
                                                    
 Chile IGPA                     28625.03     -0.16     2.30
                                                    
 Argentina MerVal               31112.71      0.55     3.48
                                                    
 Colombia IGBC                  12471.86     -0.37     9.68
                                                    
                                                           
 Currencies                                daily %    YTD %
                                            change   change
                                  Latest            
 Brazil real                      3.4783     -0.76    -4.74
                                                    
 Mexico peso                     18.8560      0.45     4.47
                                                    
 Chile peso                        600.1      0.40     2.42
                                                    
 Colombia peso                   2782.98      1.04     7.15
 Peru sol                          3.235     -0.03     0.06
                                                    
 Argentina peso (interbank)      20.2500      0.05    -8.15
                                                    
 Argentina peso (parallel)          20.5      0.34    -6.20
                                                    
 
 (Reporting by Bruno Federowski; editing by Jonathan Oatis)
  
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