By Asher Levine and Carolyn Cohn
SAO PAULO/LONDON Feb 24 Ukraine's dollar bonds
rallimed on Monday on expectations the heavily indebted nation
would receive aid from Western donors, while recovering investor
sentiment helped Brazil's currency reach its strongest level in
Ukraine, whose President Viktor Yanukovich was forced out of
office at the weekend, said on Monday it needed $35 billion in
foreign assistance over the next two years and appealed for
Investors were optimistic that Western organizations such as
the International Monetary Fund would step in to help prevent a
Ukrainian default now that Russia seems less likely to deliver
the remaining $12 billion of a $15-billion bailout package
agreed in December.
Ukraine's five-year credit default swaps (CDS) fell 166
basis points from Friday's close to a 3-week low of 941 bps,
according to Markit. Ukraine's 2023 dollar bond
rose 4.83 points to 89 cents on the dollar, according to Reuters
"Political considerations in this instance override economic
or financial ones and ... Western aid is likely to be
substantial enough to prevent a credit event from taking place
in the short term," Goldman Sachs said in a client note,
referring to the risk of default or restructuring in Ukraine.
Ukraine's 2017 dollar bond gained 4.0 points
to 90 cents on the dollar, while the 2022 dollar bond
rose 4.31 points to 89.125.
But the hryvnia fell to a five-year low. Analysts
said the country is running out of foreign exchange reserves to
support it and is likely to focus its use of funds on repaying
"Given that international reserves have likely, on our
estimates, declined ... to $12-14 billion, we think downside
risks to the UAH (hryvnia) remain large," Goldman Sachs added.
Other emerging European currencies were generally steady,
supported by the news from Ukraine. Russia's rouble and
Hungary's forint both strengthened slightly against the
Elsewhere, Nigeria's naira rebounded from early
losses against the dollar after the central bank and energy
company Total sold dollars on the market, dealers
REAL GAINS PAST 2.34/DLR
In Latin America, both the Mexican and Chilean pesos
gained about 0.25 percent against the dollar while
Brazil's real strengthened past the 2.35 per dollar
threshold for the first time in over a month.
Data on Monday showed inflation in Mexico eased in
mid-February, boosting expectations that the central bank would
leave rates on hold throughout the year.
The real, which has weakened about 8 percent since
mid-October on concern over economic fundamentals, has rallied
for four days as investors view the government's new primary
budget surplus target with cautious optimism. The target of 1.9
percent of gross domestic product, albeit lower than in previous
years, could help build credibility in the nation's economic
President Dilma Rousseff said on Monday that Brazil's
currency fluctutions "should not be confused with vulnerability"
and were part of a normal price adjustment process that would
create more "more realism in our trade relations."
Neighboring Venezuela's five-year credit default swaps eased
but remained at extremely distressed levels above 2,000 bps,
according to Markit, after nearly two weeks of violent
anti-government protests that have killed at least eight people.
Latin American stocks rose as slight gains
in Chilean and Mexican shares helped offset a
decline in Brazilian stocks.
Still, broader emerging market stocks fell as
Chinese shares posted their biggest loss in seven weeks on
worries about the property market.
News reports stoked fears that banks have begun tightening
loans to developers before next week's annual parliamentary
meetings, fuelling worries about a slowdown in China's property
market and growth outlook.