April 23, 2018 / 8:48 PM / a year ago

EMERGING MARKETS-Brazil, Mexico currencies sink as U.S. yields spike

 (Recasts with real, peso levels; adds analyst comment)
    By Bruno Federowski
    SAO PAULO, April 23 (Reuters) - Brazil's currency hit a
nearly 1-1/2-year low and Mexico's peso sank to it weakest since
early March on Monday on bets that accelerating U.S. inflation
could spark a faster pace of interest rate hikes.
    Yields on U.S. benchmark 10-year Treasury notes
hit their highest in over four years, reducing the allure of
riskier emerging market assets.
    Rising inflation expectations due to fiscal stimulus and a
recovering U.S. economy have fueled bets the Federal Reserve
could hike interest rates at a faster-than-expected pace.
    Mexico's peso sank about 2.2 percent, on track to mark its
biggest one-day percentage loss since the aftermath of the
election of U.S. President Donald Trump.
    Analysts said Mexico's currency could face further pressures
in the coming months on bets leftist candidate Andres Manuel
Lopez Obrador could win a July 1 vote and shift economic policy
in Mexico.
    "The peso will continue to weaken as we approach election
day," analysts at Banorte said in a note to clients.
    The pesos of Mexico and Colombia, a fellow oil producer,
were earlier pressured by news that Iran's oil minister said
there would be no need to extend a deal on supply restraint if
crude prices rose further. Oil prices rebounded from an early
slide to finish higher and strengthen further in post-settlement
trade, as investors feared U.S. sanctions could dampen Iran's
    Currencies in Chile and Brazil both weakened
about 1 percent.
    Key Latin American stock indexes and currencies at 2030 GMT:
 Stock indexes               Latest      Daily  YTD pct
                                           pct   change
 MSCI Emerging Markets        1,158.26   -0.85    -0.02
 MSCI LatAm                   3,008.89   -0.73     6.39
 Brazil Bovespa              85,602.50    0.06    12.04
 Mexico IPC                  48,442.22    0.02    -1.85
 Chile IPSA                   5,704.70    0.27     2.52
 Chile IGPA                  28,670.33    0.33     2.46
 Argentina MerVal            30,956.22   -0.66     2.96
 Colombia IGBC               12,517.71    1.21    10.09
 Venezuela IBC               24,318.61   -4.48  1825.25
 Currencies                     Latest   Daily  YTD pct
                                           pct   change
 Brazil real                    3.4520   -1.19    -4.02
 Mexico peso                   18.9335   -2.18     4.04
 Chile peso                      602.5   -1.10     2.02
 Colombia peso                2,809.34   -1.90     6.15
 Peru sol                        3.234   -0.43     0.09
 Argentina peso (interbank)    20.2575   -0.23    -8.18
 (Additional reporting by Michael O'Boyle in Mexico City;
editing by G Crosse)
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