April 23, 2018 / 2:57 PM / 4 months ago

EMERGING MARKETS-LatAm currencies weaken on rising U.S. bond yields, oil decline

    By Bruno Federowski
    SAO PAULO, April 23 (Reuters) - Latin American currencies
weakened sharply on Monday as expectations of accelerating U.S.
inflation pushed U.S. bond yields higher, reducing the allure of
emerging market assets.
    Yields on 10-year U.S. debt hit their highest in over four
years as huge tax cuts and a two-year budget agreement drove the
Treasury to ramp up borrowing.
    Rising inflation expectations due to fiscal stimulus and a
recovering U.S. economy have also fueled bets the Federal
Reserve could hike rates at a faster-than-expected pace.
    "Higher U.S. yields are a negative for risk-taking, which is
boosting the value of the dollar worldwide," said Dan Kawa, a
partner at Flag Asset Management.
    The U.S. dollar strengthened against a broad range of
emerging-market currencies, with Latin American currencies among
the most vulnerable.
    Currencies in Chile and Brazil weakened 0.7
percent and 0.9 percent, respectively. The Mexican and
Colombian pesos led the losses, dropping more than 1
percent, in the wake of falling crude prices.
    Oil prices fell after Iran's oil minister said there would
be no need to extend a deal on supply restraint if crude prices
rose further.
    Since early 2017, the Organization of the Petroleum
Exporting Countries, Russia and other non-OPEC crude producers
have curbed output with the aim of eliminating a global oil
glut. The pact runs until the end of 2018.
    Latin American equities were mostly down due to risk
aversion, although local drivers kept a lid on losses.
    The benchmark Bovespa stock index slipped 0.7
percent, weighed down by blue chips such as state-controlled oil
company Petróleo Brasileiro SA and miner Vale SA
.
    For-profit college operator Kroton Educacional SA
jumped as much as 8.1 percent to a one-month high after it
agreed to buy a controlling stake in Somos Educação SA
, foraying deeper into primary education. Somos shares
soared nearly 50 percent.
    
    Key Latin American stock indexes and currencies at 1420 GMT:
 Stock indexes                            daily %    YTD %
                                Latest     change   change
 MSCI Emerging Markets          1155.62     -1.08     0.85
                                                   
 MSCI LatAm                     2990.94     -1.32     7.17
                                                   
 Brazil Bovespa                84938.06     -0.72    11.17
                                                   
 Mexico IPC                    48459.83      0.06    -1.81
                                                   
 Chile IPSA                     5683.65      -0.1     2.14
                                                   
 Chile IGPA                    28563.98     -0.04     2.08
                                                   
 Colombia IGBC                 12354.50     -0.11     8.65
                                                   
                                                          
 Currencies                               daily %    YTD %
                                           change   change
                                 Latest            
 Brazil real                     3.4428     -0.93    -3.76
                                                   
 Mexico peso                    18.8315     -1.65     4.61
                                                   
 Chile peso                       600.3     -0.73     2.39
                                                   
 Colombia peso                  2796.77     -1.45     6.62
 Peru sol                         3.227     -0.22     0.31
                                                   
 Argentina peso (interbank)     20.2300     -0.10    -8.06
                                                   
 Argentina peso (parallel)        20.53      0.10    -6.33
                                                   
 
 (Reporting by Bruno Federowski
Editing by Jeffrey Benkoe)
  
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