December 3, 2016 / 12:25 AM / 3 years ago

EMERGING MARKETS-Mexico peso edges up, but Trump trade risks loom

(Recasts with peso outlook, adds analyst comments)
    MEXICO CITY, Dec 2 (Reuters) - Mexico's peso ended the week
slightly higher, but remained vulnerable to concerns about
shifts in U.S. trade policy under the incoming administration of
U.S. President-elect Donald Trump while Brazil's real wobbled on
uncertainty over fiscal reform.
    The Mexican peso rose on Friday, ending the week up about
0.3 percent at 20.64 per dollar. The peso has traded in an
increasingly narrow range after blowing out to a record low
following Trump's unexpected victory on Nov. 8.
    Trump has threatened to curtail trade with Mexico, which
sends about 80 percent of its exports to its northern neighbor.
    Analysts at Mexican bank Banorte said in a note on Friday
that concerns about changes to the U.S.-Mexico trade
relationship would continue to weigh on the peso. The bank
projects the currency could end the year at 21.50 per dollar.
    The peso is one of the most liquid emerging market
currencies and it tracks sentiment on risky assets. Banorte said
it could also suffer if elections in Italy and Austria on Sunday
feed concerns about growing anti-establishment movements.
    Strategists at Citi on Friday said that even though some
contrarian investors are betting the Mexican peso has become
cheap, their research showed the buying laggard currencies did
not pay off in bearish markets for emerging market currencies. 
    While the Mexican peso is down about 19 percent this year,
Brazil's real is up about 14 percent, supported by hopes the
country's new president will implement fiscal reform plans while
high interest rates are also fueling demand. 
    However, the real has suffered recently due to concerns
about Trump's impact on global trade as well as worries that
President Michel Temer's reform agenda could stall.
    The real was little changed on Friday after weakening
more than 2.3 percent in the previous session on fears that
friction between lawmakers and prosecutors over corruption cases
could delay the approval of austerity measures.
    Brazil's benchmark stock index rose nearly 1.4
percent, recouping some of its over 2 percent drop on Thursday. 
    Key Latin American stock indexes and currencies at 0015 GMT:
 Stock indexes                          daily   YTD %
                                            %  change
                             Latest    change  
 MSCI Emerging Markets         853.07   -0.62    7.42
 MSCI LatAm                   2248.27    0.72   22.87
 Brazil Bovespa              60316.13    1.36   39.14
 Mexico IPC                  44555.26   -0.73    3.67
 Chile IPSA                   4202.98    0.13   14.20
 Chile IGPA                  20991.27    0.09   15.64
 Argentina MerVal            16947.76   -0.55   45.16
 Colombia IGBC                9725.55    0.71   13.78
 Venezuela IBC               38483.35    5.96  163.80
 (Reporting by Michael O'Boyle; editing by Diane Craft)
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