April 28, 2020 / 8:09 PM / a month ago

EMERGING MARKETS-Brazil's real, Mexican peso lead recovery in Latam FX

    * Brazil stocks extend gains into second straight session
    * Mexican peso supported by strong March trade surplus
    * Chilean assets shrug off S&P outlook downgrade

 (Updates prices)
    By Ambar Warrick and Susan Mathew
    April 28 (Reuters) - Brazil's real jumped 3% on Tuesday and
the Mexican peso looked set for its best session in almost three
weeks as investors were encouraged by plans to reopen a number
of major economies that were on lockdown to contain the COVID-19
pandemic.
    Brazil's real rose from record-low levels touched
last week, when the exit of a popular Brazilian minister had
raised worries of political instability in Latin America's
largest economy. 
    The currency was on course for its biggest one-day
gain in nearly two years, while Sao Paulo-listed stocks
shot up as much as 4.1% on broad-based gains.  
    Sentiment rose as several states in the United States
allowed businesses to reopen after a near-total halt in activity
to contain the outbreak, while many other countries such as
Italy and Spain plan to reopen their economies in the coming
weeks.
    Mexico's peso rose 1.7%, supported by data showing
the country had a larger-than-expected trade surplus in March.
The peso has recovered about 6% from its lowest this year, just
a fraction of its 22% yearly loss. The currency has been roiled
by crashing oil prices hindering its already weak economy.
 
    "Key to monitor will be the government's latest fiscal plan
to help (indebted state oil firm) Pemex, alongside its
still-delayed public-private energy infrastructure package,"
wrote Wilson Ferrarezi, an economist at TS Lombard. 
    Chile's peso firmed, even though ratings agency
Standard & Poor's revised the country's outlook downward to
negative and said a credit downgrade was possible in the next
two years.
    Latin American currencies have been pressured by safe-haven
demand for the U.S. dollar. Dampened economic activity has also
weighed heavily on risk assets in the region.
    "In the next few months, we believe that fiscal stimulus,
equity returns, and the management of the exit strategies will
be paramount for currencies. The global laundry bin is full of
dirty shirts but the USD looks less dirty than most," wrote Mark
McCormick, global head of FX strategy at TD Securities.
    Markets were also awaiting central bank meetings in Europe
and the United States for further cues on measures to dampen
COVID-19's economic impact.
    Brazil's central bank is likely to cut interest rates
further into negative territory next week. A drop in consumer
inflation over the month to mid-April also gives the bank more
room to cut rates.
    Argentine stocks surged 10% to their highest in
seven weeks, while Chilean stocks rose almost 3%.
Regional stocks took some support from gains on Wall Street, on
the back of strong earnings.
    
    Key Latin American stock indexes and currencies 1940 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     904.34     1.01
                                   
 MSCI LatAm               1641.16     5.52
                                   
 Brazil Bovespa          81193.94     3.78
                                   
 Mexico IPC              35663.62     1.99
                                   
 Chile IPSA               3920.14     2.84
                                   
 Argentina MerVal        32950.94    9.887
                                   
 Colombia COLCAP          1142.57     2.37
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.4981     2.98
                                   
 Mexico peso              24.2943     1.57
                                   
 Chile peso                 845.2     1.69
                                   
 Colombia peso            4036.73     0.33
                                   
 Peru sol                  3.3867     0.30
                                   
 Argentina peso           66.6300    -0.15
 (interbank)                       
                                   
 
 (Reporting by Ambar Warrick in Bengaluru; Editing by Dan
Grebler)
  
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