May 4, 2018 / 10:41 PM / 6 months ago

EMERGING MARKETS-Argentine peso rebounds following dramatic rate hike

 (Updates prices, adds news from Chile and Venezuela)
    SAO PAULO/BUENOS AIRES, May 4 (Reuters) - Argentina's peso
strengthened sharply on Friday, gaining over 5 percent against
the dollar after the central bank hiked the benchmark interest
rate to 40 percent in a dramatic bid to shore up the currency.
    On Thursday, the peso plunged nearly 8 percent even as the
central bank hiked the rate by 300 basis points, its second
surprise hike in less than a week.
    After that move failed to calm markets, the bank boosted the
rate again on Friday by 675 basis points. The central bank has
hiked the benchmark rate some 1,275 basis points since April 27.

    That appeared to do the trick for now, and the peso
 rallied 5.26 percent by late afternoon.
    Elsewhere in the region, currencies were mixed as traders'
eyes were fixed on the ongoing tariff talks between the United
States and China.
    The Mexican peso was the biggest loser, falling 1
percent against the dollar after the U.S. Labor Department
reported job growth increased less than expected in April. The
report stoked bets of constrained monetary policy.
    Chile's new government, meanwhile, announced it will slash
$1.15 billion from its budget in 2018 and a total of $4.6
billion through 2021 in an effort to return the country to
"fiscal responsibility."
    Finance Minister Felipe Larrain said on Friday the cuts are
the equivalent of 1.6 percent of the annual budget.
    In Colombia, the peso currency rose 1.35 percent,
helped by solid oil prices, which rose on Friday as the market
awaits news from Washington on possible new sanctions on Iran.

    In crisis-racked Venezuela, the chairman of the country's
top bank, Banesco, condemned a 90-day state takeover and arrest
of 11 executives on Friday as locals thronged cash machines and
sped up transfers to other institutions.
    The move marked the biggest crackdown on the country's
financial sector since late leftist leader Hugo Chavez. 
    The government of Chavez's successor, President Nicolas
Maduro, said on Thursday it was targeting Banesco for "attacks"
against the OPEC country's rapidly depreciating currency.  
    
Key Latin American stock indexes and currencies at 2037 GMT:
     
 Stock indexes           Latest   daily % change   YTD % change
 MSCI Emerging           1136.17           -0.15          -1.92
 Markets                                          
 MSCI LatAm              2853.00            0.42           0.88
                                                  
 Brazil Bovespa         83118.03            -0.2           8.79
                                                  
 Mexico IPC             46992.17           -0.22          -4.79
                                                  
 Chile IPSA              5622.24           -0.32           1.04
                                                  
 Chile IGPA             28344.67           -0.24           1.30
                                                  
 Argentina MerVal       28736.99            -2.6          -4.42
                                                  
 Colombia IGBC          12301.10           -0.42           8.18
                                                  
 Venezuela IBC          20169.56           -8.22        1496.78
                                                  
                                                               
 Currencies              Latest   daily % change   YTD % change
                                                  
                                                  
 Brazil real              3.5278           -0.14          -6.08
                                                  
 Mexico peso             19.2500           -1.00           2.33
                                                  
 Chile peso               621.35           -0.52          -1.08
                                                  
 Colombia peso           2819.45            1.35           5.77
                                                  
 Peru sol                   3.27            0.06          -1.01
                                                  
 Argentina peso          21.8500            5.26         -14.87
 (interbank)                                      
                                                  
 Argentina peso            21.65           -0.46         -11.18
 (parallel)                                       
                                                  
 
 (Reporting by Gram Slattery and Hugh Bronstein; Editing by
Jeffrey Benkoe and Dan Grebler)
  
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