EMERGING MARKETS-Brazil's real set to recoup weekly losses as dollar slides
Adds comments, updates prices throughout
By Sruthi Shankar and Shreyashi Sanyal
Jan 6 (Reuters) - Latin American currencies rallied on Friday, with the Brazilian real looking to recoup this week's losses after data showing a moderation in U.S. wage growth hurt the dollar.
The real BRL= jumped 2.1% to 5.23 per dollar - its strongest level since Dec. 29, while the Colombian peso COP=, Chilean peso CLP= and Mexican peso MXN= rose in the range of 1.1% to 2.2%.
The dollar wilted against its major peers =USD after data the U.S. economy added jobs at a solid clip in December but investors took solace from a moderation in wage gains that could put the Federal Reserve on course for smaller rate hikes.
Traders priced in a stronger chance that the U.S. central bankat its two-day meeting in February.
"Job gains were still robust enough to dispel recession concerns, while wage pressures had cooled considerably from last month's data scare to avoid stoking expectations that the Fed will have to continue acting forcefully," Simon Harvey, head of FX analysis at Monex Europe, told clients.
"Given Powell's implied preference to downshift the pace of the hiking cycle again at the meeting, we think 25bps is the likeliest option month barring a substantial uptick in core services inflation."
The real, among the top performing EM currencies in 2022, came under pressure earlier this week on concerns about Brazil's fiscal health under President Luiz Inacio Lula da Silva's leadership.
Lula roiled domestic markets.on Friday it was possible for the country to grow with responsibility, in an attempt to calm investors after communication hiccups in the early days of the leftist administration
"The 'pragmatic Lula' that many had hoped for when he first won the election has yet to make an appearance," said
William Jackson, chief emerging markets economist at Capital Economics.
"The good is that some of Lula's appointees have tried to calm investors' (and this has helped Brazilian assets claw back lost ground)."
The main Bovespa stock index .BVSP jumped 0.9%, but enough to reverse weekly declines. Miner Vale VALE3.SA jumped 1.7% as iron ore prices rose on optimism around China's stepped-up policy support for the ailing property sector. IRONORE/
Overall, Latin American equities .MILA00000PUS were set to end the week with gains of 2.5% as hopes of a rebound in China's economy lifted most commodity prices.
Elsewhere, South African rand ZAR= slipped 0.3% to 17.17 per dollar after weakening to as low as 17.11 after a Bloomberg report said the governing party wants the central bank's mandate broadened to shore up the economy and promote employment in addition to its existing task of targeting inflation.
Key Latin American stock indexes and currencies at 1923 GMT:
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
Argentina peso (parallel) ARSB=
(Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Richard Chang and Alistair Bell)