January 2, 2018 / 10:10 PM / 3 months ago

EMERGING MARKETS-Latam currencies, stocks rally at start of 2018

 (Adds view on U.S. dollar, updates prices)
    Jan 2 (Reuters) - Latin American currencies firmed sharply
on Tuesday as the dollar broadly retreated on bets for a slower
pace of U.S. interest rate hikes while solid economic growth
data in China bode well for the region's raw materials exports. 
    A key dollar index hit a 3-1/2-month low, weighed by
expectations of a slower pace of interest rate increases by the
Federal Reserve amid a tepid U.S. inflation picture.
    Fewer U.S. rate hikes than expected could help support
demand for higher-yielding emerging market assets, which are
seen as riskier than dollar bonds. 
    Mexico's peso gained more than 1 percent. Investors are
betting that Mexico's central bank could raise borrowing costs
again in February after hiking last month, according to yields
on Mexican interest rate swaps.
    Mexico's peso tumbled to its weakest in about 10 months in
December, hurt by concerns that talks between Mexico, the United
States and Canada could fail to broker a new free trade
    Banco Base said in a note on Monday the peso would be
vulnerable to more losses ahead on free-trade jitters and could
sink past 20 per dollar in the coming weeks. 
    Also on Tuesday, a key factory index in China rose to a
four-month high in December, confounding forecasts for a
decline, and backing bets on resilience for the world's largest
consumer of commodities, which are key exports of Latin American
    Currencies from Brazil and Colombia
strengthened close to 2 percent.
    Stock indexes were up throughout the region, with Brazil's
benchmark Bovespa leading gains as traders unwound bets
on a credit downgrade.
    Brazilian policymakers met in December with rating agencies
to stave off a downgrade after lawmakers delayed a key vote on a
plan to streamline the social security system and curb
government spending.
    "The market sought protection from what looked like an
imminent sovereign downgrade, but that did not materialize,"
H.Commcor brokerage trader Cleber Alessie said.

    Key Latin American stock indexes and currencies at 2120 GMT:
 Stock indexes                            daily %    YTD %
                                 Latest    change   change
 MSCI Emerging Markets           1177.98     1.76     1.69
 MSCI LatAm                      2909.76     2.89     2.89
 Brazil Bovespa                 77891.04     1.95     1.95
 Mexico IPC                     50033.95     1.38     1.38
 Chile IPSA                      5618.91     0.98     0.98
 Chile IGPA                     28220.56     0.86     0.86
 Argentina MerVal               31084.42     3.39     3.39
 Colombia IGBC                  11528.66     0.44     1.39
 Venezuela IBC                   1265.26     0.17   -96.01
 Currencies                               daily %    YTD %
                                           change   change
 Brazil real                      3.2588     1.67     1.67
 Mexico peso                     19.4850     1.10     1.10
 Chile peso                        606.5     1.34     1.34
 Colombia peso                      2927     1.88     1.88
 Peru sol                          3.237     0.00     0.00
 Argentina peso (interbank)      18.3900     1.41     1.14
 Argentina peso (parallel)          19.2     0.42     0.16
 (Reporting by Bruno Federowski in Sao Paulo and Michael O'Boyle
in Mexico City; Editing by Susan Thomas)
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