January 17, 2020 / 7:52 PM / 2 months ago

EMERGING MARKETS-Strong China data powers rally in Latam markets

 (New throughout, updates prices)
    * Mexican peso hits highest since October 2018
    * Chile's peso gains on higher copper prices
    * Brazil's real posts third straight week of losses 
    * Brazilian miner Vale hits over one-year high

    By Susan Mathew
    Jan 17 (Reuters) - The Mexican peso scaled a more than
one-year high on Thursday as Latin American currencies rallied
after stronger-than-expected economic data from China fueled
optimism about global growth in the wake of a Sino-U.S. trade
truce.
    Data on Friday showed China ended 2019 on a stronger
footing, even as economic growth cooled to its weakest in nearly
30 years, and a surprise acceleration in Chinese industrial
output sent copper prices to eight-month highs.

    Chile, the world's top producer of the red metal, saw its
currency gain 0.3% to 773.14 to the dollar. 
    MSCI's index of Latam currencies rose 0.4%
with Mexico's peso firming 0.4% to its highest since
October 2018 despite a stronger dollar. Brazil's real
gained 0.6% after two days of losses.
    However, the real is set to post its worst week in more than
two months, down about 1.6% in its third straight week of
losses.
    "To a large extent, outflows have been a result of sweeping
changes in Brazil's economy as it adjusts to record-low local
interest rates," said Gustavo Rangel, chief economist, LATAM at
ING. Brazil's central bank had cut interest rates four times
last year to an all-time low of 4.5%.
    "A more supportive BRL environment should emerge gradually
throughout the year, but it depends on the eventual confirmation
that the monetary easing cycle has concluded and, more
importantly, stronger evidence that an activity recovery is
firmly under way."
    Even though analysts agree with the Brazilian government's
assessment that the local economy has started to look up, a
recent spate of weak economic indicators have led to speculation
about an interest rate cut in February.
    In Mexico, the peso added around 0.5% this week. Despite the
deterioration in macro fundamentals, carry trade should continue
to act as an effective foreign exchange anchor in the nearer
term for the peso, ING's Rangel said. 
    Stocks in the region also rallied, lifted by a
record-setting rally on Wall Street. An index of regional
equities added 1.3% with heavyweight Brazilian
equities rising 1%, powered by a 3% gain for Vale SA
.
    The miner said on Thursday it had halted tailings operations
at its Esperança mine to potentially carry out work to improve
safety at the site, sending the benchmark Dalian iron ore
futures higher.
    
    Key Latin American stock indexes and currencies at 1930 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1145.92      0.46
                                        
 MSCI LatAm                    2922.69      1.27
                                        
 Brazil Bovespa              117930.23      1.05
                                        
 Mexico IPC                   45637.98      0.74
                                        
 Chile IPSA                    4881.06     -0.25
                                        
 Argentina MerVal             42621.75     0.612
                                        
 Colombia COLCAP               1652.13      0.26
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.1616      0.66
                                        
 Mexico peso                   18.7015      0.38
                                        
 Chile peso                      772.5      0.39
                                        
 Colombia peso                 3330.75     -0.30
 Peru sol                        3.321      0.03
                                        
 Argentina peso                60.0000     -0.03
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Richard
Chang)
  
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