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EMERGING MARKETS-Latam assets rise; EMFX rallies to record high on weak dollar

EMERGING MARKETS-Latam assets rise; EMFX rallies to record high on weak dollar

05/07/2021 15:41
EMERGING MARKETS-Latam assets rise; EMFX rallies to record high on weak dollar

Brazil's retail sales drop far less than expected in March

Latam FX set for best week this year

U.S. jobs growth slows in April; dollar falls

Adds details on EMFX, updates comment

By Ambar Warrick and Shashank Nayar

- Latin American stocks and currencies gained on Friday and were set for large weekly gains as weak U.S. payrolls data pushed the dollar to a more than two-month low, which helped emerging market currencies scale record highs.

MSCI's index of Latin American currencies <.MILA00000CUS> rose 0.9% to a near four-month high and was set for its best week since November.

Between a weakening dollar, subdued U.S. Treasury yields, and improving risk sentiment, the MSCI's index of emerging market (EM) currencies .MIEM00000CUS surged 0.7% to a record high, even as several countries grapple with a damaging wave of COVID-19 infections.

"EM has been extremely resilient during this shock - last year there were five sovereign defaults and in the majority of those cases there were pre-existing credit issues," Lupin Rahman, head of EM sovereign credit at PIMCO told the Reuters Global Markets Forum.

"This year higher commodity prices as well the International Monetary Fund’s Special Drawing Rights allocation will allow many countries much-needed liquidity."

The dollar index .DXY fell 0.8% to a more than two-month low after payrolls data showed U.S. job growth unexpectedly slowed in April. nL1N2MT2XD

In Latam, Brazil's real BRBY, BRL= rose 1% to a near four-month high after retail sales volumes fell 0.6% in March from February, far less than the 7.0% decline forecast by a Reuters poll of economists. nL1N2MU0RM

The real was set for its best week this year after the Brazilian central bank hiked rates on Wednesday, and flagged more strong hikes to help curb rising inflation.

The Mexican peso MXN= gained 0.7%, taking support from copper prices even as annual inflation picked up faster than expected in April to its highest level in more than three years and moved well above the central bank's target level. nL1N2MU0P0 O/R

The currency of the world's top copper producer Chile CLP= gained 1.4% as copper prices surged to record highs, while a trade surplus of $2.040 billion in April further helped sentiment.nAQN044WJA MET/L

However, gains in the peso were limited as Chile's lower house of Congress approved a bill that would slap a progressive royalty on sales of copper as prices rise.nL1N2MT295

Peru's sol PEN= added 0.2% on strength in copper prices.

Colombia's peso COP= was the top performer in Latam on Friday, surging 1.4% as anti-government protests appeared to be calmer after nine days of unrest. nL1N2MT2SF

The MSCI's index of Latam stocks .MILA00000PUS jumped nearly 2%, and was set for its best week in three months.

Key Latin American stock indexes and currencies:



Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1350.66

0.74

MSCI LatAm .MILA00000PUS

2505.43

1.9

Brazil Bovespa .BVSP

121251.49

1.11

Mexico IPC .MXX

49227.46

0.6

Chile IPSA .SPIPSA

4618.21

-0.27

Argentina MerVal .MERV

51167.53

3.6

Colombia COLCAP .COLCAP

1280.97

1.14




Currencies

Latest

Daily % change

Brazil real BRBY

5.2250

1.01

Mexico peso MXN=D2

19.9287

0.65

Chile peso CLP=CL

695.3

0.63

Colombia peso COP=

3747.38

1.44

Peru sol PEN=PE

3.81

0.16

Argentina peso (interbank) ARS=RASL

93.8300

-0.03



(Reporting by Ambar Warrick and Shashank Nayar in Bengaluru; Additional reporting by Aaron Saldanha; Editing by Andrea Ricci)

(([email protected]; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2256;))