* Mexico, Colombian currencies both add 0.9% * EM bonds under pressure * Brazil's real flat as virus fears weigh By Ambar Warrick Jan 6 (Reuters) - The Mexican and Colombian pesos surged on Wednesday tracking higher oil prices, while other Latin American currencies rose as the prospect of a Democrat-controlled U.S. Senate drove down the dollar and pushed flows into risk assets outside America. U.S. stock futures and the dollar retreated after Democrats won one U.S. Senate race in Georgia and led in another on Wednesday, moving closer to a majority that will allow President-elect Joe Biden to carry out his agenda. His agenda includes increased stimulus measures and higher corporate taxes. The prospect of higher fiscal spending weighed on the dollar, while the possibility of higher corporate taxes hurt the outlook for several U.S. stock sectors, particularly technology. In Latin America, Mexico's peso rose 0.9% against the dollar while fellow oil exporter Colombia's peso also surged, as oil prices hit a 11-month high after Saudi Arabia announced a big voluntary production cut. "If you think of the key drivers of EM risk assets - on the monetary side - it's negative rates. It effectively means that capital is being moved out of the U.S. into the rest of the world," said Polina Kurdyavko, head of emerging markets at BlueBay Asset Management. Brazil's real was flat in early trade, despite data showing an expansion in the country's services sector through December. Latin America's largest economy is among the worst hit in the world by the coronavirus, and the country is racing to ramp up vaccinations amid a renewed surge in infections. The MSCI's index of Latin American stocks rose 1.4% in early trade. But in the fixed income space, broader emerging market investment-grade bonds came under pressure from expectations of increased U.S. debt issuance. Abu Dhabi and Qatar sovereign 2050 Eurobonds were 1.8 cents lower to their weakest in two months, while Saudi Arabia's 2060 issue sank 1.9 cents to its lowest since mid July, Refinitiv data showed. "There's a high probability and expectation that in the U.S. there'll be a blue wave and big infrastructure spending and that of course means the U.S. government will issue more debt. That has put not just GCC (Gulf Cooperation Council) but investment grade names under pressure across EM," said Alejandro Arevalo, emerging market debt manager at Jupiter Asset Management. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1324.08 0.31 MSCI LatAm 2480.78 1.37 Brazil Bovespa 119317.74 -0.05 Mexico IPC - - Chile IPSA 4374.99 0.18 Argentina MerVal - - Colombia COLCAP 1431.73 0 Currencies Latest Daily % change Brazil real 5.2579 0.11 Mexico peso 19.6978 0.91 Chile peso 693.7 0.22 Colombia peso 3410.15 0.91 Peru sol 3.6098 0.50 Argentina peso 84.8900 -0.09 (interbank) (Reporting by Ambar Warrick in Bengaluru; Additional reporting by Sruthi Shankar and Tom Arnold)
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