EMERGING MARKETS-Currencies, stocks edge lower after U.S. data

Wed Feb 5, 2014 11:41am EST

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(Adds Reuters poll; updates with reaction to U.S. data)
    By Walter Brandimarte and Carolyn Cohn
    RIO DE JANEIRO/LONDON, Feb 5 (Reuters) - Emerging market
stocks and currencies slipped after weaker-than-expected U.S.
private-sector jobs data added to fears of a slowdown in the
world's largest economy, which could further dampen growth
prospects for developing countries.
    Losses were moderated, however, as many investors preferred
to wait for Friday's key U.S. nonfarm payroll data to draw a
better picture of the state of the U.S. economy.
    While some investors find attractive valuations in emerging
markets after a recent selloff, others fear that prices could
still fall if the Chinese or U.S. economies stumble.
    "There are still worries about emerging markets and China
and now we had some bad U.S. data which raised more concern as
the U.S. economy needs to stand on its own," said Luiz Roberto
Monteiro, a trader with Renascenca brokerage in Sao Paulo.
    Latin American stocks tracked by a benchmark MSCI index for
the region slid 0.6 percent after data showed
U.S. private employers added less jobs than expected in January,
as wintry weather kept a lid on hiring. 
    The broader MSCI index for emerging market stocks 
dropped 0.2 percent, just a few points off a five-month intraday
low it hit on Tuesday after plunging 6 percent in the past two
weeks. Chinese markets remained closed for holidays.
    Sentiment toward emerging market currencies remained fragile
as many investors bet the dollar would continue to gain as the
U.S. Federal Reserve continues to cut back stimulus this year.
Among those currencies, the Turkish lira and South African rand
look the most vulnerable despite aggressive interest rate hikes
by their central banks, a Reuters poll found. 
    The rand dropped 1 percent on Wednesday while the
lira traded 0.2 percent lower.
    The Mexican peso weakened 0.5 percent to 13.39 per
dollar, increasing year-to-date losses to 2.7 percent, but far
from an 18-month low of 2.6 per dollar it hit on Jan. 24.
    Brazil's real was little changed, however, as the
central bank continued to support the exchange rate by offering
investors a hedge against currency losses. 
    
    POLAND KEEPS RATES UNCHANGED
    The zloty rose half a percent to a one-week high
against the euro following the Polish central bank's expected
decision to leave interest rates unchanged at 2.5 percent.
    Poland sees no need to react to turbulence in emerging
markets as a recent slight fall in its exchange rate is only
temporary, central bank governor Marek Belka said after the rate
decision. 
    The rouble rebounded from a five-year low set on
Tuesday after the finance ministry said it would postpone forex
purchases of nearly $6 billion to refill one of the country's
sovereign wealth funds, which would have pressured the currency.
 
    Russian stocks also rebounded from Tuesday's
five-month lows.
    But the Ukrainian hryvnia extended losses to hit a
fresh four-year low as political turmoil continued, though the
central bank stepped in to support it at 8.7 per dollar.
 
    Data on Tuesday showed Ukraine's current account deficit
widened sharply last year, to $16 billion. 
    "The (central bank) seems to have finally abandoned its
four-year peg ... and will be moving toward greater FX
flexibility," analysts at Bank of America-Merrill Lynch said in
a client note. 
    "As a result, we hike our FX forecast to 10 per dollar for
(end) 2014, which should bring UAH close to its fair value and
cut the current account deficit to a more sustainable 3 percent
of GDP."
    
    Key Latin American stock indexes and currencies at 1610 GMT

                                      daily %    YTD %
       Stock indexes   Latest         change     change
                                                 
 MSCI LatAm            2,831.63       -0.46      -11.13
                                                 
 Brazil Bovespa        46,462.69      -1.07      -9.79
                                                 
 Mexico IPC            39,907.94      -0.44      -6.60
                                                 
 Chile IPSA            3,397.99       -0.27      -8.14
                                                 
 Chile IGPA            16,982.15      -0.15      -6.83
                                                 
 Argentina MerVal      5,869.07       -4.38      8.87
                                                 
 Colombia IGBC         11,937.51      0.27       -8.67
                                                 
 Peru IGRA             15,078.58      -0.01      -4.29
                                                 
 Venezuela IBC         2,815.58       0.08       2.89
                                                 
                                                 
 Currencies                           daily %    YTD %
                              Latest  change     change
 Brazil real           2.4119         0.09       -2.28
                                                 
 Mexico peso           13.3875        -0.48      -2.67
                                                 
 Chile peso            559.7000       -0.29      -6.00
                                                 
 Colombia peso         2054.0000      -0.90      -5.94
                                                 
 Peru sol              2.8240         -0.04      -1.10
                                                 
 Argentina peso        7.9300         0.98       -18.13
 (interbank)                                     
                                                 
 Argentina peso        12.4500        0.80       -19.68
 (parallel)                                      
                                                 
                                                 
 Turkish lira          2.2435         -0.25      
                                                 
 South African rand    11.128         -0.71      
                                                 
 Russian rouble        34.903         0.31       
                                                 
 
    
   

 (Additional reporting by Natsuko Waki in London and Priscila
Jordao in Sao Paulo; Editing by Paul Simao)
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