EMERGING MARKETS-Ukraine bonds firm; Latam currencies rise
(Updates prices, adds Latin America, Nigeria, quote) By Asher Levine and Natsuko Waki RIO DE JANEIRO/LONDON, Feb 17 (Reuters) - Ukraine's sovereign bonds rose across the board on Monday after opposition protesters ended a two-month occupation of Kiev's city hall, while Latin American currencies mostly advanced, tracking global weakness in the dollar. Ukrainian opposition protesters opened a road to limited traffic, meeting an amnesty offer aimed at easing a stand-off over President Viktor Yanukovich's rule. Meanwhile, authorities withdrew riot police from a flashpoint district of the capital. Ukraine's dollar bonds maturing in 2014, 2020 and 2023 all rose around one to two points . But the country's hryvnia currency fell 0.8 percent on the day to 8.84 per dollar, in trading thinned by a market holiday in the United States. Earlier this month Ukraine put in place capital controls to help stem a slide in the hryvnia. The measure prevents large clients from buying dollars to pay down credit ahead of schedule or make investments abroad and requires importers to deposit money in a dedicated account for six days before it is used to buy foreign currency. "Activity is small today. Tomorrow, we are likely to see very large activity," said a Kiev-based trader. Another trader said, "(We) hope the central bank steps in tomorrow to prevent the potential weakening of the hryvnia." Concerns are rising over the central bank's ability's to support the hryvnia, given that it has spent about eight percent of its reserves on currency intervention in January alone, leaving them at $18 billion, an eight-year low. "The National bank of Ukraine is running out of foreign exchange reserves so it's inevitable for the currency to fall," said Neil Shearing, chief emerging market economist at Capital Economics. Latin American currencies mostly strengthened as investors continued to weigh the outlook for U.S. growth following soft economic data last week, which has sapped demand for the greenback in global markets. Brazil's real and Mexico's peso both rose about 0.3 percent. Argentina's peso gained its most in nearly two weeks as banks continued to sell dollars to adjust to a central bank rule change earlier this month that limits their net foreign currency positions. Yields on Brazilian interest rate futures fell after a weekly central bank poll showed economists expect Brazil's economy to grow just 1.79 percent in 2014, down from a 1.9 percent estimate a week earlier. "People are seeing that the central bank may be less aggressive (in hiking rates)," said Silvio Campos Neto, an economist with Tendencias in Sao Paulo. The benchmark MSCI emerging market share index rose 0.8 percent after data showed Chinese banks disbursed the highest volume of loans in any month in four years in January, suggesting the world's second-biggest economy may not be cooling as much as some fear. China is a key purchaser of commodities such as iron-ore, soybeans and copper from other developing nations. MSCI's Latin American stock index was little changed, however, as a fall in steelmaking shares pushed Brazil's Bovespa stock index slightly lower. Brazil's raw steel output fell 1.4 percent in January on an annual basis, data showed on Monday. MARKETS SETTLE Expectations that the U.S. Federal Reserve would not disrupt its gradual pace of monetary stimulus withdrawal also helped boost emerging markets, many of which had been pummeled in recent weeks on concerns over regional political crises and the Fed's policy moves. "(Chinese data) was obviously strong which is good for near-term growth. More generally, the market has taken a more sanguine view of Fed tapering," Shearing said. "For now the market seems to have settled down." In the week to Feb. 12, investors withdrew almost $4.5 billion out of emerging bond and equity funds, with equity funds seeing their 16th straight week of outflows. Since the start of the year, investors have pulled more than $21 billion from emerging equity funds tracked by EPFR, compared to $15.2 billion in the whole of 2013. The focus will be on monetary policy meetings in Hungary and Turkey, both due on Tuesday, dealers said. Elsewhere, Nigeria's naira pared early losses against the dollar after the central bank offered to sell $600 million at its twice-weekly forex auction on Monday, its highest offer in two years. For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see ) (Additional reporting by Marcin Goettig in Kiev and Bruno Federowski in Sao Paulo; Editing by Catherine Evans and Diane Craft)
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