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EMERGING MARKETS-Latam FX gains on commodity strength, benign U.S. inflation

    * Chilean peso best regional performer
    * EMFX rises after slow start to the day
    * Brazil's real lags on dismal retail sales data

    By Ambar Warrick
    Feb 10 (Reuters) - Chile's peso rose on Wednesday as copper
prices hit an eight-year high, with broader Latin American and
emerging market currencies gaining as the dollar dipped on signs
that underlying U.S. inflation remained benign. 
    U.S. consumer prices rose moderately in January as the
pandemic continued to weigh on the labor market and the services
industry. The reading raised expectations that the Federal
Reserve would be in no hurry to tighten policy in the
near-future, given the economy was still reeling from the
pandemic.
    This in turn pushed up sentiment, inviting plays into
risk-driven assets across emerging markets. 
    The dollar dropped after the data, while U.S. yields - a
rise in which had recently pressured EM markets - also dipped.

    "For right now, the Federal Reserve isn't worried about
inflation and wants the economy to first reach full employment
before taking any action to combat inflation... it's not a great
policy for investors who rely on fixed income or risk averse
investors who don't want to invest in stocks," said Nancy Davis,
founder of Quadratic Capital Management. 
    Chile's peso rose 1.1% to an over one-week high,
extending gains into a third session as copper prices surged on
expectations that large stimulus measures and accommodative
policies would elevate industrial demand for the metal.
    Oil exporter Colombia's peso rose 0.8% tracking
higher oil prices, while broader emerging market currencies
shrugged off initial losses to trade positive. 
    Latin American stocks continued to lag their
broader emerging market peers, the latter of which hit
a record high. 
    Assets in Asia and Europe have outpaced their Latin American
peers, as high regional infections and concerns over fiscal
health kept investors at bay.
     
    The real lagged its peers as retail sales
slumped a far more-than-expected 6.1% in December, underlining
the drastic impact a second wave of infections had on the
economy.
    Brazil is among the worst hit countries by the pandemic, and
has been struggling to rein in infections and roll out vaccines.
The government recently confirmed it was considering more
stimulus measures to offset the pandemic's economic ructions.
    But these measures could possibly overstretch fiscal
spending in the country and push up risk premiums on Brazil's
debt and currency, forcing the central bank to tighten policy
sooner or by more than planned, the bank's chief warned.

    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1421.86               0.9
                                        
 MSCI LatAm                    2404.45              0.22
                                        
 Brazil Bovespa              118754.56              -0.6
                                        
 Mexico IPC                       0.00                 0
                                        
 Chile IPSA                    4530.02             -0.28
                                        
 Argentina MerVal                    -                 -
                                        
 Colombia COLCAP               1380.29                 - Currencies             Latest     Daily % change
 Brazil real                    5.3911             -0.19
                                        
 Mexico peso                   20.0190              0.28
                                        
 Chile peso                      727.2              1.05
                                        
 Colombia peso                 3544.69              0.84
 Peru sol                       3.6347              0.08
                                        
 Argentina peso                88.3500             -0.09
 (interbank)                            
                                        
 

    
 (Reporting by Ambar Warrick in Bengaluru;
Editing by Bernadette Baum)
  
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