June 18, 2019 / 2:08 PM / 4 months ago

EMERGING MARKETS-Latam FX firm on ECB's dovish boost, Brazil stocks jump 1%

    By Susan Mathew
    June 18 (Reuters) - Latin American currencies firmed on
Monday, with the Mexican peso hitting its highest in more than
two weeks, boosted by the European Central Bank president's
dovish comments.
    ECB President Mario Draghi said the bank will need to ease
policy again, possibly through new rate cuts or asset purchases,
if inflation doesn't head back to its target.
    "EM assets have bounced on the dovish ECB," said strategists
at Morgan Stanley.
    "Perhaps markets believe that the ECB moves will reactivate
the euro-funded carry trade, and that this would be enough for
EM to keep strengthening versus the dollar, despite a weak
euro-dollar pair," they said, cautioning however that any
additional dollar strength could weigh on EM currencies. 
    At 1353 GMT, the dollar was steady, bracing for the outcome
on Wednesday of the U.S. Federal Reserve's meeting, when
analysts increasingly expect the bank to signal that a rate cut
may be in the offing.
    Brazil's real jumped 1%, extending last session's
gains, while Mexico's peso climbed 0.5% to its highest
since May 30 - with the ECB boost helping them rise amid shaky
local political scenes.
    In Mexico, President Andres Manuel Lopez Obrador proposed
holding a recall referendum on his presidency on March 21, 2021,
if Congress cannot agree to a constitutional change permitting
the vote during mid-term legislative elections.
    Meanwhile, in Brazil President Jair Bolsonaro on Monday
appointed Gustavo Montezano as the head of development bank
BNDES, replacing Joaquim Levy who resigned on Sunday after
Bolsonaro publicly criticized him.
    Analysts at brokerage XP Investimentos said on Monday that
whatever the merits of Levy's exit, it does not reflect well on
the government or its efforts to paint Brazil as an attractive
and politically stable destination for foreign capital.
    Sao Paulo-traded stocks rose 1% on broad-based gains, in
line with other emerging market peers and world
    But, local listed shares of airline Azul SA lost
0.7%. Bolsonaro on Monday signed a bill into law allowing
foreign airlines to operate domestic flights in Brazil, a move
that could usher in new competition or lead foreign carriers to
buy up the local players.
    Petrochemical company Braskem SA lost 0.8%
controlling shareholder Odebrecht SA filed on Monday for
bankruptcy protection.    
    Key Latin American stock indexes and currencies at 1353 GMT:
    Stock indexes             Latest    Daily %
 MSCI Emerging Markets         1024.73      1.36
 MSCI LatAm                    2793.19      2.18
 Brazil Bovespa               99030.04      1.44
 Mexico IPC                   43112.64      0.34
 Chile IPSA                          -         -
 Argentina MerVal                    -         -
 Colombia IGBC                12282.79      0.25
       Currencies             Latest    Daily %
 Brazil real                    3.8540      1.19
 Mexico peso                   19.0470      0.68
 Chile peso                      696.1      0.59
 Colombia peso                  3263.8      0.53
 Peru sol                       3.3370      0.13
 Argentina peso                43.9300      0.16

 (Reporting by Susan Mathew in Bengaluru
Editing by Nick Zieminski)
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