June 12, 2019 / 2:42 PM / 4 days ago

EMERGING MARKETS-Brazil, Mexico currencies firm on U.S. rate cut prospects

    June 12 (Reuters) - The currencies of Brazil and Mexico
firmed on Wednesday, benefiting from prospects that the Federal
Reserve will cut interest rates soon after data showed that U.S.
inflation barely rose in May.
    The greenback held steady after a brief dip on the data.
Emerging market currencies tend to firm on expectations of Fed 
interest rate cut as a higher borrowing cost environment tends
to divert money out of riskier assets.
    A steady move higher in U.S. interest rates last year saw
outflows in emerging markets that contributed to currency crises
in Argentina and Turkey among others.
     Brazil's real climbed 0.4% with hopes of pension
reform passage, seen as crucial to get the economy back on
track, lifting sentiment toward the currency. 
    "We remain optimistic passage and stay bullish BRL,"
analysts at Citigroup said in a note.
    Mexico's peso was rose marginally, looking set to
extend gains to a fourth day.
    The currency has made up most of the losses incurred after
U.S. President Donald Trump's surprise threat late last month to
impose tariffs on Mexican imports.
    Most other regional currencies weakened though, with lower
oil prices contributing to a 0.5% fall in crude exporting
Colombia's peso, the first decline in five days.
Chile's peso also ticked lower as prices of copper - the
country's main export - fell.
     Overall, emerging markets remained under pressure after
Trump said he would hold up a trade deal with China unless it
agreed to four or five major points.
    Going into the G20 summit this month, some profit taking
among emerging markets currencies could be expected, analysts at
Citigroup said a note.
    Trump has said he is ready to impose another round of
tariffs in Chinese goods if no progress is made in trade talks
with Chinese President Xi Jinping at the summit. 
    Among stocks, Brazil's Bovespa fell 0.2% after
hitting 12-week highs in early trade as iron ore and oil majors
on the index were hit by falling prices of crude and the
steel-making ingredient.
    Grupo Pão de Açucar (GPA), the controlling
shareholder of Brazil's home appliances and furniture retailer
Via Varejo, was among top gainers, up 1.4% gain.
    GPA said its board of directors approved the sale of all
shares it owns in Via Varejo for a minimum price of 4.75 reais
each. Via Varejo shares slid 4.4%.
    
    Key Latin American stock indexes and currencies at 1426 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1026.44     -0.52
                                        
 MSCI LatAm                    2806.57      0.55
                                        
 Brazil Bovespa               98727.64     -0.23
                                        
 Mexico IPC                   43771.14      0.13
                                        
 Chile IPSA                    5076.93      0.15
                                        
 Argentina MerVal                    -         -
                                        
 Colombia IGBC                12260.51      -0.5
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.8320      0.43
                                        
 Mexico peso                   19.1170      0.04
                                        
 Chile peso                      694.2     -0.22
                                        
 Colombia peso                  3261.1     -0.19
 Peru sol                         3.33     -0.12
                                        
 Argentina peso                      -         -
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Susan Thomas)
  
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