November 7, 2018 / 4:46 PM / 7 days ago

EMERGING MARKETS-Latam currencies fall despite softer dollar

    By Aaron Saldanha
    Nov 7 (Reuters) - Latin American currencies traded lower on
Wednesday despite a weaker U.S. dollar following the U.S.
congressional election results, as the trade-sensitive Mexican
peso succumbed to profit-taking and Brazil's real
was dogged by concerns over local pension reforms.
    MSCI's index of currencies in Latin America
was down about 0.1 percent, less than the 0.4 percent drop in
the dollar index after the outcome of a split U.S.
Congress raised expectations that any major U.S. fiscal policy
boost to the economy is unlikely for now.
    The Democratic Party took control of the U.S. House of
Representatives, potentially hindering President Donald Trump's
ability to push through reform on key matters such as trade and
tax cuts.
    Mexico's peso had initially firmed against the
weakening greenback, but then reversed course to trade 0.4
percent lower. It had gained 3.2 percent in the four sessions
through Tuesday.
    Gabriela Siller, director of economic analysis at Banco
Base, attributed the peso's weakness to its rapid recovery over
the past few sessions since plumbing a more than four
month-closing low last Wednesday.
    Siller added that the Republican Party's strong showing at
the gubernatorial level and in the Senate raised the possibility
of a second term for Trump, who has taken a hard stand against
Mexico on key issues such as trade.
    The MSCI index of stocks in the region was
up 0.1 percent, helped by Mexican stocks firming for the
fourth session in five.
    However, Brazil's Bovespa stock index fell about 0.6
percent, with the movers on the benchmark largely being
determined by firms reporting results.
    The real was a touch lower, with investors watching
for the outcome of a meeting between President-elect Jair
Bolsonaro and current President Michel Temer later in the day.
    Temer and his successor are expected to discuss pension
reform, a matter considered crucial by investors to improve the
financial situation of Latin America's largest economy.
    While Bolsonaro said he plans to  advance pension reforms
quickly, Citi Research analysts believe it is more likely that
he would come up with his own proposal after taking office.

    Argentina's peso weakened about 0.5 percent, adding
to the overall regional weakness, with Fitch Ratings revising
the country's rating outlook to negative from stable.

    The ratings agency said prospects for the inflation-plagued
country's economic recovery in the medium term were unclear. 

            
    Key Latin American stock indexes and currencies at 1623 GMT
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets          999.67      0.75    -14.35
                                                  
 MSCI LatAm                    2730.93      0.05     -3.49
                                                  
 Brazil Bovespa               88158.88     -0.58     15.39
                                                  
 Mexico IPC                   46817.83      1.06     -5.14
                                                  
 Chile IPSA                    5249.78      0.53      0.53
                                                  
 Argentina MerVal             31207.61      0.76      3.80
                                                  
 Colombia IGBC                12322.04      0.84      8.37
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.7608     -0.10    -11.90
                                                  
 Mexico peso                   19.7776     -0.27     -0.40
                                                  
 Chile peso                      676.1      0.47     -9.09
                                                  
 Colombia peso                 3137.53      0.24     -4.96
 Peru sol                        3.363      0.21     -3.75
                                                  
 Argentina peso                35.8300     -0.50    -48.09
 (interbank)                                      
                                                  
 

 (Reporting by Aaron Saldanha in Bengaluru; Editing by Dan
Grebler)
  
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