October 5, 2018 / 3:12 PM / 8 months ago

EMERGING MARKETS-Latam currencies firm as dollar rally pauses on U.S. jobs data

    By Susan Mathew
    Oct 5 (Reuters) - Latin America currencies were headed for a
third straight week of gains, with the Argentine and Mexican
pesos gaining on Friday after U.S. jobs data eased concerns
about faster interest rate hikes by the Federal Reserve, and
weakened the dollar.
    U.S. job growth slowed sharply in September, missing
economists' forecasts, although jobs numbers for July and August
were revised higher. Wages rose steadily last month, but not
enough to raise concerns about inflation, the data showed.
    That weakened the dollar and provided some respite to
emerging markets currencies that had been hammered on Thursday
when upbeat U.S. economic data from earlier in the week sent
Treasury yields surging and the greenback to 11-month highs.

    The MSCI's Latam currency index jumped
nearly 1 percent on Friday. While the Argentine and Mexican
pesos firmed, Brazil's real was set for another volatile session
heading into the country's presidential elections in the
    After three straight sessions of losses, the Mexican peso
 firmed about 1 percent to 18.9125 per dollar. The
country's central bank kept rates unchanged in a widely expected
move on Thursday, but signaled an upside risk to inflation.

    "The recovery of the peso is related to the increase in
dollar sales after the exchange rate reached a level of 19.20
pesos per dollar during yesterday's session," Banco Base said.
    Argentina's peso rose more than 1.5 percent, and was
set to log its best week since April 2002, bolstered by the
recession-hit country striking a funding deal with the
International Monetary Fund and the central bank selling
billions of high yield short-term bonds to reduce liquidity.
    Brazil's real was a little weaker, reversing course
from earlier in the day, as polls showed see-sawing voter
support for the presidential candidates just 48 hours before the
first round vote.
    The latest poll showed the market-preferred conservative
candidate, Jair Bolsonaro, widening his lead over leftist rival
Fernando Haddad. Polls through the week have swung between
predicting a run-off victory for both candidates.
    "Markets appear complacent ahead of the first round and seem
to be significantly underpricing the likelihood of a possible
Haddad victory in the runoff," Barclays said in a note.
    Still, as a majority of the polls show Bolsonaro gaining
ground, the real has mostly gained and is on pace for its
biggest jump in a week since March 2016.
    "We expect volatility in FX and local markets to increase
after the elections in the case of a second round, and see
downside risks for the real, particularly if the margin between
Bolsonaro and Haddad is narrower than what polls suggest," the
bank said.
    Key Latin American stock indexes and currencies at 1435 GMT:
 Stock indexes                             daily  YTD % change
                                 Latest        %  
 MSCI Emerging Markets           1002.96   -0.73        -12.78
 MSCI LatAm                      2656.20    0.69         -6.72
 Brazil Bovespa                 82809.26   -0.17          8.39
 Mexico IPC                     48564.99   -0.24         -1.60
 Chile IPSA                      5316.05   -0.19         -0.19
 Argentina MerVal               31380.78    1.46          4.37
 Colombia IGBC                  12509.74   -0.14         10.02
 Currencies                                daily  YTD % change
                                  Latest  change  
 Brazil real                      3.8711    0.05        -16.88
 Mexico peso                     18.9125    0.98          4.16
 Chile peso                        669.2    0.93         -8.15
 Colombia peso                    3027.5    0.18         -1.50
 Peru sol                          3.318    0.30         -2.44
 Argentina peso (interbank)      37.6500    1.99        -50.60
 Argentina peso (parallel)          37.5    1.33        -48.72

 (Reporting by Susan Mathew in Bengaluru;
Editing by Susan Thomas)
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