June 16, 2020 / 2:16 PM / 23 days ago

EMERGING MARKETS-Latam FX set for biggest daily gain in 3 weeks, Chile's peso leads

    * Chile's c.bank expected to hold rates
    * Brazil's real recovers from steep losses
    * Chile's peso up 1.5%

    By Ambar Warrick
    June 16 (Reuters) - Brazil's real rose on Tuesday after five
straight losing sessions, while Chilea's peso led gains among
Latin American currencies as the U.S. Federal Reserve's
bond-buying program bolstered risk appetite.
    The Fed's action and a record jump in monthly U.S. retail
sales boosted emerging markets, which had recently come off
three-month highs due to concerns over a second wave of
coronavirus infections.
    The MSCI's index of Latin American currencies
 rose about 2.8% and was set for its biggest
daily gain in three weeks; stocks rose more than
4%.
    Markets awaited testimony to Congress from Fed Chair Jerome
Powell, while reports of the U.S. government planning a nearly
$1 trillion infrastructure proposal raised spirits.
    "Markets love a good stimulus narrative, leaving yesterday's
news flow as music to its ears," wrote Mark McCormick, Global
Head of FX Strategy at TD Securities.
    "Even so, market sentiment remains fickle, underscoring the
scope for more two-way risks across assets. While liquidity and
stimulus is king for now, under the hood, the world continues to
deal with the growth in COVID-19."
    Brazil's real recovered from steep losses the prior
session, when news that Treasury Secretary Mansueto Almeida was
to resign fed political and economic worries.
    Data also showed that Brazil's retail sales plunged at a
record pace in April, although analysts forecast a recovery with
the easing of coronavirus curbs.
    Brazilian stocks rose about 2.7%, boosted by a
stronger open on Wall Street.
    Chilean stocks added about 2%, while Colombian
shares resumed trade after a long weekend with a 3%
jump.
    Chile's peso strengthened 1.5% to the dollar ahead of
a central bank meeting. The bank is widely expected to keep
rates on hold at 0.5%. 
    "Given the clear reference to using non-conventional
instruments for additional monetary easing, we continue to
believe the policy rate has reached its terminal level," Goldman
Sachs analysts wrote in a note.
    "Additional easing measures, if necessary, will continue to
come from extending liquidity provisions and facilitating bank
lending." 
    Oil producers Mexico and Colombia saw their
pesos strengthen in tandem with crude prices, as markets priced
in supply cuts and looked to an increase in demand.
    
    Key Latin American stock indexes and currencies:
     
    Stock indexes             Latest    Daily % change
 MSCI Emerging Markets          993.83             2.85
                                        
 MSCI LatAm                    1991.55             4.53
                                        
 Brazil Bovespa               94824.46             2.65
                                        
 Mexico IPC                   38111.32             1.86
                                        
 Chile IPSA                    3970.98                2
                                        
 Argentina MerVal                    -                -
                                        
 Colombia COLCAP               1177.59             3.01
                                        
                                                       
       Currencies             Latest    Daily % change
 Brazil real                    5.1068             0.67
                                        
 Mexico peso                   21.9798             1.07
                                        
 Chile peso                      774.5             1.54
                                        
 Colombia peso                 3724.98             1.27
 Peru sol                       3.4547             0.67
                                        
 Argentina peso                69.6100            -0.33
 (interbank)                            
                                        
 
 (Reporting by Ambar Warrick in Bengaluru; Editing by David
Gregorio)
  
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