May 22, 2018 / 3:24 PM / a month ago

EMERGING MARKETS-Brazil's real climbs again after central bank defends rate decision

    SAO PAULO, May 22 (Reuters) - Brazil's real jumped
almost 1 percent on Tuesday after the central bank released
meeting minutes that many traders interpreted as hawkish, while
a rally in commodities prices pushed up currencies in other
major Latin American economies.
    Last Wednesday, Brazil's central bank unexpectedly kept the
benchmark Selic rate at 6.50 percent, defying market
expectations of a 25-basis-point cut.
    In the minutes of that meeting released early on Tuesday,
the bank said it had considered a rate cut and acknowledged that
the decision came as a surprise to the market. 
    But the bank also indicated that the recent strength of the
U.S. dollar had reduced the likelihood of Brazilian
inflation remaining below the official target for the
foreseeable future. The body also indicated it would likely keep
the rate steady in the near future and called Wednesday's rate
hold "the best possible decision."
    "In the central bank's argument, they say that inflation
expectations have become unanchored toward the upside, which is
to say that it's no longer necessary to cut the Selic rate,"
said José Francisco Gonçalves, head economist at Banco Fator in
Sao Paulo.
    The real had climbed 0.98 percent by late morning, following
a 1.35 percent gain on Monday, after the central bank almost
quadrupled the value of its currency swap program. That followed
a rough streak for the real, which reached its lowest level in
two years on Friday.
    Elsewhere in Latin America, Chile's peso shot up
some 1.27 percent, following global copper prices, which
had jumped 1.45 percent by mid-day. Colombia's peso
jumped 0.78 percent, boosted by prices for oil, which climbed
back over $80 per barrel amid supply constraints.

    Equities markets were relatively flat across the region.
    Among the major winners on Brazil's benchmark Bovespa index
 was state electricity utility Cia Energetica de Minas
Gerais SA. Its shares rose 4 percent after the
nation's electricity regulator approved a power tariff hike.
    
Key Latin American stock indexes and currencies at 1446 GMT:
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets         1143.56      0.62      -1.9
                                                  
 MSCI LatAm                    2721.91      1.22     -4.92
                                                  
 Brazil Bovespa               81972.79      0.19      7.29
                                                  
 Mexico IPC                   45231.07     -0.16     -8.35
                                                  
 Chile IPSA                    5664.87     -0.05      1.80
                                                  
 Chile IGPA                   28671.63     -0.03      2.47
                                                  
 Argentina MerVal             31588.50     -0.14      5.07
                                                  
 Colombia IGBC                12109.14       0.2      6.49
                                                  
 Venezuela IBC                22940.52      0.63   1716.15
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.6525      0.98     -9.29
                                                  
 Mexico peso                   19.7655      0.25     -0.34
                                                  
 Chile peso                      628.5      1.27     -2.20
                                                  
 Colombia peso                 2852.75      0.78      4.53
 Peru sol                        3.274      0.27     -1.13
                                                  
 Argentina peso                24.3200      0.29    -23.52
 (interbank)                                      
                                                  
 Argentina peso                   25.3      0.40    -23.99
 (parallel)                                       
                                                  
 

 (Reporting by Gram Slattery and Claudia Violante; Editing by
Dan Grebler)
  
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