July 5, 2019 / 1:48 PM / 3 months ago

EMERGING MARKETS-Dollar strength pressures Latam FX, Brazil real falls from over 3-mth peak

    By Susan Mathew
    July 5 (Reuters) - Latin American currencies weakened on
Friday, with Brazil's real retreating from three-month highs, as
the dollar strengthened after a strong rebound in U.S. job
growth had investors trimming bets for an aggressive interest
rate cut by the Federal Reserve in its July meeting.
    The dollar index, which measures the greenback
against a basket of six major currencies, was up 0.5% after data
showed that U.S. job growth rebounded strongly in June as
government hiring surged.
    "The results were really encouraging and reinforced the
underlying strength of the U.S. market and the U.S. economy in
general, and is likely to help to temper the markets' aggressive
calls for easier policy from the Federal Reserve," said Candice
Bangsund, asset allocation manager at Fiera Capital in Montreal.
    The Brazilian real fell 0.7% after touching its
strongest level in more than three months on Thursday after the
government's pension reform bill cleared a key congressional
hurdle.   
    A Reuters poll showed that the real is waiting for an
imminent breakthrough of President Jair Bolsonaro's social
security overhaul in Congress to consolidate recent gains after
a volatile first half of 2019. Senators are expected to complete
the legislative process by year-end.
    The Mexican peso slipped 0.1%, while the Chilean peso
 slid half a percent as the dollar's strength pressured
copper prices.
    Emerging market assets have rallied in the first half of
2019 on growing hopes that major central banks would turn to
dovish policies in the wake of slowing global growth, which
would make emerging market assets more attractive.
    Another Reuters poll showed that developing world currencies
may have seen the best of 2019 as U.S. President Donald Trump is
expected to backpedal on his conciliatory tone from the recent
G20 summit.
    MSCI's index of Latin American currencies is
up 0.4% so far this week, while its stocks index
is on course to wrap up with a 1.3% gain for the week. 
    Among stocks, Brazil's Bovespa stock index fell 0.7%
after scaling an all-time high last session on pension reform
optimism. 
    Losses were broad-based. A dip in iron ore prices hitt miner
Vale, which weighed most on the index.
     
    Key Latin American stock indexes and currencies at 1336 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1057.64     -0.66
                                        
 MSCI LatAm                    2881.39     -1.34
                                        
 Brazil Bovespa              102779.67     -0.83
                                        
 Mexico IPC                          -         -
                                        
 Chile IPSA                    5048.46     -0.13
                                        
 Argentina MerVal                    -         -
                                        
 Colombia IGBC                       -         -
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.8243     -0.68
                                        
 Mexico peso                   19.0340     -0.19
                                        
 Chile peso                     682.48     -0.51
                                        
 Colombia peso                 3212.63     -0.73
 Peru sol                        3.291      0.00
                                        
 Argentina peso                      -         -
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; editing by Jonathan
Oatis)
  
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