July 11, 2019 / 2:13 PM / 2 months ago

EMERGING MARKETS-Latam currencies firm on Fed rate cut signals

    By Sruthi Shankar
    July 11 (Reuters) - Latin American currencies rose on
Thursday after comments from U.S. Federal Reserve chief Jerome
Powell boosted the prospects of an interest rate cut this month,
with Brazil's markets  buoyed by optimism over the government's
pension reform.
    The Brazilian real jumped 0.4%, its fourth straight
day of gains that took the currency to over a four-month high,
although the Bovespa stock index retreated from a record
high set in the previous session.
    Brazil's markets have rallied this week as investors draw
comfort from progress in the government's efforts to overhaul
the pension system, a cornerstone of President Jair Bolsonaro's
economic agenda aimed at saving the public purse around 1
trillion reais ($263 billion) over the next decade.
    The lower house passed the main text of the bill on
Wednesday by a far wider margin than predicted.
    House Speaker Rodrigo Maia said he hoped the complete bill
could be put to a second, final vote by Friday or early
Saturday. That would allow the Senate to take up debate in
August after a two-week recess. 
    "We are particularly bullish on BRL. The next risk to watch
is the extent of the amendments that would lower the expected
savings from the reform," Morgan Stanley analysts wrote in a
note, setting a target of 3.65 per dollar for the real.
    Sao Paulo-listed stocks were down about 0.5% as banking
stocks weighed. Shares in Petroleo Brasileiro SA
gained 1.3% after Goldman Sachs started coverage of the
state-run oil company with a "buy" rating.
    In testimony to a congressional committee, Powell pointed to
"broad" global weakness that was clouding the U.S. economic
outlook amid uncertainty about the fallout from a trade conflict
with China and other nations. Hopes of central banks
turning dovish in the wake of a global slowdown have supported
risky, emerging market assets.
    Mexico's peso stabilized from steep losses this week
after abrupt exit of former Finance Minister Carlos
Urzua.
    The Chilean and the Colombian pesos gained,
while the Peruvian sol was flat ahead of release of
monetary policy decision. 
    Peru's central bank held the benchmark interest rate at
2.75% earlier this month, as it had for more than a year, citing
tame inflation and weak primary economic growth due to global
trade tensions.
    Latin American stock indexes and currencies at 1339 GMT:
    
 Stock indexes                       daily %
                            Latest    change
 MSCI Emerging Markets      1056.60     0.73
                                     
 MSCI LatAm                 2972.27     0.68
                                     
 Brazil Bovespa           105752.06    -0.20
                                     
 Mexico IPC                       -        -
                                     
 Chile IPSA                 5074.83     0.03
                                     
 Argentina MerVal                 -        -
                                     
 Colombia IGBC                    -        -
                                     
                                            
 Currencies                          daily %
                                      change
                             Latest  
 Brazil real                 3.7433     0.39
                                     
 Mexico peso                19.1197     0.10
                                     
 Chile peso                  684.64     0.27
                                     
 Colombia peso              3195.56     0.19
                                     
 Peru sol                    3.2820     0.13
                                     
 Argentina peso             41.8400     0.02
 (interbank)                         
                                     
 

 (Reporting by Sruthi Shankar in Bengaluru; Editing by Dan
Grebler)
  
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