EMERGING MARKETS-Brazil yields fall as cenbank opens door for rate cut
By Bruno Federowski SAO PAULO, Sept 1 (Reuters) - Yields paid on Brazilian interest rate future contracts fell on Thursday as traders increased bets on an October rate cut after the central bank dropped a mention to a lack of space for reducing borrowing costs from its policy statement. In a widely expected unanimous vote, the bank on Wednesday kept its benchmark Selic rate at 14.25 percent, the highest since July 2006. But it also laid out the blueprint to lower rates, highlighting a reduction in uncertainty over the approval of austerity measures and easing food inflation. "All in all, while reckoning that it still continues to be a bold call, we think there is a possibility for a monetary easing cycle to start at the next Copom meeting," economists with Haitong investment bank wrote in a client note. Market bets were about evenly split between a 25 basis-point cut in October and stability, according to Reuters calculations. Expectations that rates could fall sooner rather than later helped weaken Brazil's real currency, which fell 0.7 percent on Thursday. The move also reflected lower demand for high-yielding currencies in general as traders increased bets on an imminent U.S. rate hike ahead of the widely followed nonfarm payrolls report on Friday. A drop in crude prices also weighed on currencies from oil exporters, such as the Mexican and Colombian pesos. Brazilian shares seesawed after the country's Senate convicted former President Dilma Rousseff in an impeachment trial, ousting her, the day before. Shares in Cia Energética de Minas Gerais SA were the biggest winners in the benchmark index after the power holding company almost doubled the amount of shares it intends to sell from its minority stake in Transmissora Aliança de Energia SA. Shares in Taesa, as the electricity transmission company is known, shed as much as 8.7 percent, its biggest intraday drop in a month. Key Latin American stock indexes and currencies at 1610 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 891.36 -0.26 12.53 MSCI LatAm 2400.69 -0.04 31.25 Brazil Bovespa 58001.55 0.17 33.80 Mexico IPC 47538.94 -0.01 10.61 Chile IPSA 4120.21 0.02 11.96 Chile IGPA 20450.21 0.1 12.66 Argentina MerVal 15585.60 -0.4 33.49 Colombia IGBC 10122.61 -0.53 18.43 Venezuela IBC 11962.25 0 -18.00 Currencies daily % YTD % change change Latest Brazil real 3.2418 -0.42 21.75 Mexico peso 18.8300 -0.25 -8.50 Chile peso 679.3 0.10 4.48 Colombia peso 2987.93 -0.56 6.07 Peru sol 3.4 -0.29 0.41 Argentina peso (interbank) 14.8500 0.57 -12.58 Argentina peso (parallel) 15.31 0.65 -6.79 (Reporting by Bruno Federowski; Editing by Jonathan Oatis)
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