Bonds News

EMERGING MARKETS-Latam FX rise as dollar steadies; Mexican peso shines

 (Updates prices)
    By Susan Mathew
    Sept 30 (Reuters) - Mexico's peso jumped as much as 2.2% on
Wednesday, and most other Latin American currencies erased
session losses as the dollar pared gains, with hopes of
conservative spending in Brazil bolstering its currency. 
    The greenback gave up gains it had made after a chaotic U.S.
presidential debate. It fell against most currencies as risk
sentiment got a lift after U.S. government officials expressed
hope that another stimulus package could be passed to help ease
the economic impact of the coronavirus-induced recession.
    The peso more than made up for losses over the last
three sessions and was poised for its best session in three
weeks. While it is on track to post its best quarter this year,
the impact of rising coronavirus cases on a battered economy
looms large.
    Brazil's real gained 0.4% after Economy Minister
Paulo Guedes said the government is examining expenditures in
order to avoid breaking the nation's so-called "fiscal ceiling,"
emphasizing that the payment of sovereign debt will not be put
at risk by a proposed welfare program.
    Official figures showed national debt rose to a new record
of 88.8% of gross domestic product and the public sector primary
deficit in the 12 months to August, excluding interest payments,
widened to 8.5% of GDP.
    "We expect the monthly fiscal deficit to... (converge) to
our end-2020 forecast of a 948 billion reais deficit or 13.7% of
GDP," said Citigroup strategists in a note.   
    They added that in case the Congress drops President Jair
Bolsonaro's veto to extend payroll tax exemptions for 17 sectors
next year, public spending would increase in 2021 by around 10
billion reais, surpassing the spending cap. 
    The real is among the worst-performing emerging market
currencies this year, down close to 30%. On the quarter, it is
set to lose around 3%, lagging most of its regional as well as
broader emerging market peers.
    Argentina's peso was flat a day after data showed
the country's current account surplus improved significantly in
the second quarter.
    While the data is good news, the underlying drivers behind
the surplus - a sharp recession an capital controls - are
negative, said Morgan Stanley economists in a note.
    They expect Argentina's current account to remain in surplus
territory especially given the recent tightening of currency
    Stocks in the region rose, in line with Wall
Street, with Chile's IPSA posting its best day in
three months, while Argentina's Merval extended gains to
a seventh straight session.
    Mexican shares hit four-week highs, while Brazil's
Bovespa came off three-month lows. 
    Key Latin American stock indexes and currencies at 1912 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets    1082.11     1.25
 MSCI LatAm               1833.44     1.76
 Brazil Bovespa          94639.00     1.13
 Mexico IPC              37540.14     1.09
 Chile IPSA               3637.18      2.3
 Argentina MerVal        42505.98    0.733
 Colombia COLCAP          1165.58    -0.01
      Currencies          Latest   Daily %
 Brazil real               5.6195     0.38
 Mexico peso              22.1450     1.44
 Chile peso                 783.1     0.13
 Colombia peso            3825.37     1.56
 Peru sol                  3.6017    -0.11
 Argentina peso           76.1700    -0.07
 (Reporting by Susan Mathew in Bengaluru;
Editing by Bernadette Baum and Nick Zieminski)