October 3, 2018 / 3:54 PM / 8 months ago

EMERGING MARKETS-Brazil's currency, stocks rise on poll showing Bolsonaro win

    By Susan Mathew and Sruthi Shankar
    Oct 3 (Reuters) - Brazil's real posted its strongest gains
in nearly four months on Wednesday and stocks also soared after
an election poll predicted a victory for the presidential
candidate preferred by investors, while the Argentine and
Mexican pesos bucked weakness in most other emerging currencies.
    Brazil's right-wing candidate Jair Bolsonaro would beat his
main rival, leftist Fernando Haddad, in a likely second round
run-off later this month, with support for Haddad declining, an
Ibope poll released late on Tuesday showed.
    Polls show Bolsonaro reclaiming lost ground and likely
edging past Haddad in the second round, compared with fears of a
loss last week. The first round of the presidential election
will be held on Sunday.
    "Markets are starting to bet that Bolsonaro might win the
first round. They are pricing in a lot of good news," said Win
Thin, global head of emerging market currency strategy at Brown
Brothers Harriman in New York.
    The real rallied for a second straight day, up 2.5 percent
to levels last seen in early August. Brazil's benchmark Bovespa
 equities index also rose to its highest level since
mid-May, spurred by an 13 percent jump in shares of Eletrobras
. The power generation company's privatization has
been on hold but could potentially be resumed if Bolsonaro wins.
    Meanwhile, Argentina's peso firmed for a third
straight day, but gains were capped after a central bank poll of
economists raised their estimates for this year's inflation rate
due to expectations the economy would contract more than
previously anticipated.
    The poll also forecast the peso sliding to 43 to the dollar
by the end of the year. The peso was last up 1.5 percent at 37.3
to the greenback.
    The peso has lost more than 50 percent against the dollar
this year on concern President Mauricio Macri was moving too
slowly to tackle budget woes and surging inflation, forcing the
country to seek an extension and early disbursement of funds
from the International Monetary Fund.  
    The peso gained more than 4 percent in each of the last two
sessions, on the sale of high-yield short-term notes by the
central bank - aimed at mopping up excess liquidity - pursuant
to the IMF deal.
    Given the dismal economic outlook and impending presidential
elections next year, Thin said the peso's rally may not last. "I
don't think the peso is out of the woods yet."
    The Mexican peso rose 0.4 percent a day ahead of its
central bank's rate meeting, at which it is expected to leave
its benchmark interest rate at the current 7.75 percent.

    The rise in Latin American currencies contrasted with those
of most other developing countries, which were pressured by
higher oil prices. Soaring inflation added to the Turkish lira's
    The MSCI Latam currencies index was up 1.6
percent, its highest level in more than seven weeks. 
    Key Latin American stock indexes and currencies at 1442 GMT:
 Stock indexes                                                    daily %  YTD % change
                                         Latest                    change  
 MSCI Emerging Markets                             1035.64           0.23         -10.8
 MSCI LatAm                                        2714.94           3.23         -7.01
 Brazil Bovespa                                   83953.71           2.87          9.88
 Mexico IPC                                       49316.04          -0.12         -0.08
 Chile IPSA                                        5359.96           0.69          0.69
 Argentina MerVal                                 33626.88           2.74         11.84
 Colombia IGBC                                    12554.92           0.31         10.42
 Currencies                                                       daily %  YTD % change
                                                    Latest         change  
 Brazil real                                        3.8452           2.31        -13.83
 Mexico peso                                       18.7392           0.29          5.12
 Chile peso                                            658           0.06         -6.59
 Colombia peso                                     3009.61           0.19         -0.92
 Peru sol                                            3.309           0.09         -2.18
 Argentina peso (interbank)                        37.3000           2.28        -50.13
 Argentina peso (parallel)                            37.5           2.67        -48.72

 (Reporting by Susan Mathew in Bengaluru
Editing by Paul Simao)
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