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Bonds News

EMERGING MARKETS-Latam FX retreats from recent highs on U.S. political jitters

    * Chile's peso comes off highest level since mid-2019
    * Latam stocks rise in early trade
    * Mexican Dec inflation below expectations, rate cut
expected

    By Ambar Warrick
    Jan 7 (Reuters) - Mexican and Chilean currencies retreated
from recent peaks on Thursday, while most other Latin American
currencies fell as civil unrest in the United States prompted a
measure of profit taking and safe-haven buying.
    Chile's peso, the top performing Latin American
currency in 2020, tumbled around 2% from an over 17-month high,
while Mexico's peso dipped 0.7% from a 10-month peak.
    The dollar bounced off 2018 lows after hundreds of
supporters of President Donald Trump stormed the U.S. Capitol on
Wednesday in a bid to overturn his election defeat.
    This came on the heels of Democrats taking control of the
U.S. Senate, clearing the way for President-elect Joe Biden to
carry out his reform agenda.
    Emerging market risk assets had rallied on the prospect of
higher fiscal spending and corporate taxes in the United States,
which weighed on the dollar and local stocks by pushing capital
flows out of the country.
    The prospect of an economic recovery this year also pointed
to strong capital flows into emerging markets in the near-term.
    In Mexico, investors were anticipating the minutes of the
central bank's most recent meeting, where it had decided to
leave lending rates unchanged on a surprise dip in inflation and
peso stability. But the decision was reached with a narrow
majority in the bank's board.   
    With December inflation coming in slightly below
expectations, analysts forecast an interest rate cut next month.

    "Board members voting for no change likely underlined that
the downside surprises in inflation late in the year could have
been related to transitory factors... Benign inflation prints in
the coming weeks, and the changes in the central bank's board,
support our view of a 25bps cut, to 4.0%," Credit Suisse
analysts wrote in a note.
    Colombia's peso dipped 0.8%, having touched a
10-month high earlier in the week on strength in oil prices.
Recovering global crude demand is expected to benefit the
currencies of oil exporters Colombia and Mexico this year. 
    Latin American stocks rose in early trade, with Chile's
benchmark index hitting a near 11-month high. Emerging market
stocks are expected to benefit greatly in the near-term from
accommodative monetary policy across the globe.
     Key Latin American stock indexes and currencies:
                              Latest      Daily % change
 MSCI Emerging Markets         1318.17                0.22
                                        
 MSCI LatAm                    2471.35                 0.6
                                        
 Brazil Bovespa              119834.36                0.62
                                        
 Mexico IPC                          -                   -
                                        
 Chile IPSA                    4485.56                1.53
                                        
 Argentina MerVal                    -                   -
                                        
 Colombia COLCAP               1436.03                   - Currencies             Latest      Daily % change
 Brazil real                    5.3250               -0.44
                                        
 Mexico peso                   19.8161               -0.91
                                        
 Chile peso                      710.4               -2.13
                                        
 Colombia peso                 3435.84               -0.69
 Peru sol                       3.6278               -0.11
                                        
 Argentina peso                84.9900               -0.09
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru; Editing by Krishna
Chandra Eluri)
  
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