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EMERGING MARKETS-Mexican, Colombian FX helped by oil prices, while real surges

· 02/05/2021 09:19
EMERGING MARKETS-Mexican, Colombian FX helped by oil prices, while real surges

Mexican peso set to outpace peers this week

Latam stocks set for best week in 2 months

Chile's peso lags peers this week

By Ambar Warrick

- Strength in oil markets helped the currencies of exporters Colombia and Mexico on Friday, while Brazil's real jumped 1% after the economy minister said the country was ready to increase spending to combat a second wave of COVID-19.

Mexico's peso MXN= rose 0.7%, while Colombia's peso COP= added 0.4% to the dollar as oil prices hit a one-year high on expectations of recovering demand and supply curbs. O/R

Mexico's peso was also set to outperform its peers for the week with a 1.7% rise, having marked large gains earlier in the week on a spike in silver prices.

But it was dealt a blow after the supreme court on Wednesday struck down the government's crucial energy sector reform.

Criticism of the government's handling of the COVID-19 pandemic on the fiscal and political front damaged the peso through 2020, and left its outlook uncertain in 2021.

"Despite the recent positive prints (driven by the gradual reopening of the economy), the outlook for real activity in Mexico remains uninspiring due to a combination of mostly domestic factors, including the underwhelming policy response, particularly on the fiscal front," Goldman Sachs analysts wrote in a note.

Brazil's real BRBY surged after Economy Minister Paulo Guedes said the country will open spending taps "quickly" to tackle the second wave of the COVID-19 pandemic if Congress demands it, but with an eye on longer-term fiscal stability. nL8N2KB3FH

The government needs to be mindful of fiscal spending, after measures to combat the virus saw the country post a record deficit in 2020.

A report said the government was also in talks to reduce taxes on fuel- a move that could help cool inflation. nL1N2KB0Z9

Most Latam currencies lagged their emerging market peers for the week as regional cases spiked and countries were relatively slower in rolling out vaccines.

Chile's peso CLP= was among the worst performing Latam currencies this week, set for a 0.2% loss on weakness in the prices of copper, the country's largest export. The currency fell slightly on Friday. MET/L

Latin American stocks rose on Friday, with the MSCI's index .MILA00000PUS adding 1.3% in early trade. The index was also set for its best week since early-December, as it recovered from a series of weekly losses.

Key Latin American stock indexes and currencies:



Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1394.13

0.47

MSCI LatAm .MILA00000PUS

2395.04

1.31

Brazil Bovespa .BVSP

120378.08

0.94

Mexico IPC .MXX

-

-

Chile IPSA .SPIPSA

4456.65

1.01

Argentina MerVal .MERV

-

-

Colombia COLCAP .COLCAP

1359.63

-




Currencies

Latest

Daily % change

Brazil real BRBY

5.3940

0.98

Mexico peso MXN=D2

20.2260

0.72

Chile peso CLP=CL

735.7

-0.10

Colombia peso COP=

3543.52

0.36

Peru sol PEN=PE

3.6428

0.00

Argentina peso (interbank) ARS=RASL

87.9900

-0.08



(Reporting by Ambar Warrick in Bengaluru; editing by Philippa Fletcher)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837; Reuters Messaging: ambar.warrick.thomsonreuters.com@reuters.net; Twitter: @AmbarWarrick))