EMERGING MARKETS-LatAm markets rally on high-yield appetite

* Latin American financial markets up on risk demand

* LatAm currencies rally vs safe-haven US dollar

* Venezuela sells close to $5 billion in bonds

* Argentina, Dominican Republic agree with IMF

By Manuela Badawy

NEW YORK, Oct 6 (Reuters) - Latin American markets mostly
rallied on Tuesday as the demand for high-yielding assets
improved after Australia became the first G20 country to raise
interest rates since the beginning of the financial crisis.

"The environment conducive to risk-taking has rekindled,
that is one of the major forces that we are seeing today," said
Enrique Alvarez, head of Latin America strategy at IDEAglobal
in New York.

Australia's central bank raised rates by a quarter point to
3.25 percent, a move that drove the U.S. dollar, a safe-haven
asset, lower across the board.

Expectations for prolonged, low U.S. interest rates, due to
tepid economic recovery in the United States, mean investors
are less enthusiastic to hold dollar-denominated assets.

Latin American currencies rose against the U.S. dollar with
the Brazilian real BRBY firming 0.63 percent to 1.751 per
dollar, the Mexican peso MXN= rising 0.98 percent to 13.4781
per dollar, the Colombian peso COP=STFX up 0.93 percent to
1,907.6 per dollar and the Chilean peso CLP=CL gaining 0.54
percent to 554 per greenback.

The U.S. currency has recently come under heavy pressure as
growing optimism about the global economic outlook dried up
safe-haven demand and fueled a rally in stocks, commodities and
higher-yielding currencies.

The weakening of the dollar fueled a rally in gold GCZ9
that drove prices to a record high above $1,040 per ounce. Gold
is seen as a hedge against chances of stronger economic growth
sending inflation higher around the globe.

The MSCI stock index for Latin America .MILA00000PUS rose
1.54 percent a day after it jumped to its highest level in more
than 13 months on strong U.S. economic data.

Mexico's IPC stock index .MXX rose 1.6 percent on
optimism for a strong Mexican and U.S. earnings season. Peru's
IGRA stock index .IGRA and Argentina's MerVal index .MERV
rose more than 2 percent, while Brazil's benchmark Bovespa
index .BVSP rose just 0.29 percent.

Sovereign bond spreads of Latin American countries were
tighter against U.S. Treasuries as investors' optimism of the
global economic recovery spurred investors to buy
higher-yielding bonds.

Overall spreads narrowed 13 basis points over Treasuries at
309 basis points on JP Morgan's Emerging Markets Bond Index
Plus (EMBI+) 11EMJ.JPMEMBIPLUS.

ISSUES AND DEALS

Venezuela sold $4.992 billion in 2019 and 2024
dollar-denominated bonds, up from an initial offer of $3
billion at 40 percent over par in operations aimed at
strengthening the value of the black market rate of the bolivar
currency. [ID:nN06414223]

The International Monetary Fund reached agreement in
principle with the Dominican Republic on a $1.7 billion standby
loan, in order to cut the country's budget gap from 0.8 percent
of GDP to zero in 2010, the IMF said.

The program also calls for tax system improvements,
electric sector reforms, and commitment to an overall inflation
target.

Argentina meanwhile, gave a green light for an IMF review
of its economy, a move welcomed by Wall Street and holders of
the defaulted bonds as well as creditors of the Paris Club, as
it is the first step that could lead the South American country
back to international markets.[ID:nN06323034]

(Reporting by Manuela Badawy; Editing by Diane Craft)