February 4, 2016 / 3:02 PM / 2 years ago

EMERGING MARKETS-Latam currencies rally on expectations of stable U.S. rates

By Bruno Federowski
    SAO PAULO, Feb 4 (Reuters) - Latin American currencies
rallied on Thursday on bets that the U.S. Federal Reserve could
take longer than anticipated to raise interest rates amid global
financial turmoil.
    Weaker-than-expected U.S. economic data and comments by
central bank officials have led some to believe the U.S. central
bank could wait until next year to further tighten policy.
    Those expectations have led the dollar to weaken against
major currencies, reducing the prices of dollar-denominated
commodities. Emerging market assets also benefit directly from
low U.S. rates, which make high-yielding bonds seem attractive
in comparison.
    "If financial turmoil drives the Fed to delay a rates
increase, this would turn out to be good for us," said Marcos
Trabbold, a trader at B&T brokerage in São Paulo.
    The Chilean peso jumped 2 percent, tracking a rise
in copper prices. The Mexican peso advanced 0.3 percent
ahead of a central bank policy statement that is widely expected
to hold rates steady and strike a cautious tone.
    Weakness in the U.S. dollar helped drive oil prices higher
as speculation over a deal to cut crude output persisted,
contributing to a rally in the Colombian peso.
    The Brazilian real strengthened to its highest since
December to about 3.85 per U.S. dollar. Some traders raised
suspicions that public banks could be unwinding positions in
futures markets following an unusually high trading volume of
dollar-indexed government bonds earlier this week.
    Latin American stock indexes and currencies at 1440 GMT:
 Stock indexes                                daily %   YTD %
                                     Latest    change  change
 MSCI Emerging Markets                741.78     2.79   -9.13
 MSCI LatAm                          1783.85     3.86   -6.14
 Brazil Bovespa                     40705.96     2.82   -6.10
 Mexico IPC                         43724.98     1.08    1.74
 Chile IPSA                          3612.07      0.6   -1.85
 Chile IGPA                         17794.41     0.53   -1.97
 Argentina MerVal                   11186.45     0.58   -4.19
 Colombia IGBC                       8664.85     0.63    1.37
 Venezuela IBC                      14668.49    -0.18    0.55
 Currencies                                   daily %   YTD %
                                               change  change
 Brazil real                          3.8558     1.56    2.37
 Mexico peso                         18.1150     0.32   -4.89
 Chile peso                            696.6     1.95    1.88
 Colombia peso                        3301.7     2.06   -4.01
 Peru sol                             3.4741     0.43   -1.73
 Argentina peso (interbank)          14.2000    -0.21   -8.57
 Argentina peso (parallel)             14.23    -0.42    0.28

 (Reporting by Bruno Federowski; Editing by Meredith Mazzilli)
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