EMERGING MARKETS-Latam markets rise as investors hunt for yield

Tue May 6, 2014 2:00pm EDT

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RIO DE JANEIRO, May 6 (Reuters) - Latin American currencies
and stocks gained on Tuesday as investors bet the U.S. Federal
Reserve will not raise interest rates any time soon despite
encouraging U.S. economic news.
    MSCI's benchmark index for Latin America 
climbed 0.7 percent as persistently low U.S. interest rates
 and a drop in U.S. stocks encouraged
investors to seek higher returns elsewhere.
    Brazil's real  gained the most among Latin
American currencies, jumping 0.7 percent to 2.2295 per dollar.
It had sold off more than 1 percent on Monday after the central
bank announced it was halving the pace of roll-overs of expiring
currency swaps, derivatives designed to support the exchange
rate.
    The move suggested the bank may reduce the stock of swaps by
the end of the month, fine-tuning its foreign exchange
intervention program to curb further currency gains that could
hurt exporters. Since the beginning of the year, the real has 
strengthened more than 5 percent.
    "If this proves to be the case, in a situation of more
balanced flows, we would have to conclude that there has been a
change around the central bank's intervention policy, implying a
weaker real," Tony Volpon, head of emerging markets research for
Nomura Securities, wrote in a research note.
    For now, however, global appetite for yield more than
offsets a possible change in the central bank intervention
policy.
    "Even if the central bank doesn't want a stronger real, the
dollar is poised to drop in the short term," said Reginaldo
Galhardo, a currency desk manager at the Treviso brokerage.
    As the U.S. dollar remained stuck at six-month lows against
a basket of currencies, the Mexican peso rose half
a percentage point to 12.99 per dollar, on track to close at its
strongest level in nearly a month.
    Mexico's benchmark IPC stock index rallied 1.1
percent, driven by shares of retailer and bottler Femsa
.
    Brazil's Bovespa index erased early losses and rose
0.6 percent as shares of state-run oil company Petroleo
Brasileiro SA jumped more than 4 percent.
    Petrobras' gains were fueled by speculation that upcoming
election polls will show another drop in the popularity of
President Dilma Rousseff, increasing the chances of a more
market-friendly government in 2015. Investors hope Brazil's next
president will change the current policy that forces Petrobras
to incur losses by selling subsidized gasoline in the domestic
market.    
 
    
    Key Latin American stock indexes and currencies at 1743 GMT:
     Stock indexes                  daily %   YTD %
                           Latest   change    change
 MSCI Emerging Markets  1005.29     0.43      -0.17
                                              
 MSCI LatAm             3339.71     0.66      3.66
                                              
 Brazil Bovespa         53759.8     0.59      4.37
                                              
 Mexico IPC             41494.18    1.09      -2.89
                                              
 Chile IPSA             3882.74     -0.62     4.96
                                              
 Chile IGPA             19086.64    -0.46     4.72
                                              
 Argentina MerVal       6895.91     0.1       27.91
                                              
 Colombia IGBC          13404.86    -0.01     2.55
                                              
 Peru IGRA              15621.76    -0.09     -0.84
                                              
 Venezuela IBC          2332.29     -0.76     -14.77
                                              
                                              
 Currencies                         daily %   YTD %
                                    change    change
                        Latest                
 Brazil real            2.2240      0.94      5.97
                                              
 Mexico peso            12.994      0.46      0.28
                                              
 Chile peso             566.7       0.18      -7.16
                                              
 Colombia peso          1917.19     0.37      0.77
                                              
 Peru sol               2.801       0.25      -0.29
                                              
 Argentina peso         8.0000      0.03      -18.84
 (interbank)                                  
                                              
 Argentina peso         10.53       -0.38     -5.03
 (parallel)                                   
                                              
 
    

 (Reporting by Bruno Federowski, Priscila Jordao and Walter
Brandimarte; Editing by Dan Grebler)
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