EMERGING MARKETS-Mexico, Brazil currencies drop on U.S. data
By Bruno Federowski SAO PAULO, Feb 5 (Reuters) - Mexico's peso and Brazil's real slumped on Friday after data showed a pickup in U.S. wages in January that backed the view that the Federal Reserve could raise U.S. rates again this year. Tightening financial market conditions and signs that both the U.S. and global economies were slowing had undercut the case for a Fed rate hike next month and lowered the probability of monetary policy tightening this year. But a quicker pace of rate increases stokes pressure on emerging market currencies that suffer outflows triggered by higher interest rates in the world's largest economy. In Mexico, the local stock index ended 1.19 percent lower and the peso fell 0.90 percent despite three auctions in which the central bank sold $356 million to support the currency. The Brazilian real bid down 0.42 percent ahead of the local Carnival holiday. Brazilian markets will be closed Monday and Tuesday and will reopen on Wednesday. Data showed a lower U.S. unemployment rate in January and higher wages. Some traders said the figures put a 2016 interest rates increase back on the table, which could draw funds away from high-yielding emerging market assets. "Although there is more talk of recession in the U.S., this is still not the kind of data one associated with an economic contraction," BBH analysts wrote in a client note. "While we have doubted the Fed's four-hike call, we think the market is similarly extreme in not fully pricing in a single hike this year." Latin American stock indexes and currencies at 2110 GMT: Stock indexes Latest Daily pct change MSCI Emerging Markets 738.50 -0.14 MSCI LatAm 1,751.96 -1.8 Brazil Bovespa 40,592.09 -0.56 Mexico IPC 43,229.67 -1.19 Chile IPSA 3,656.44 -0.27 Chile IGPA 17,984.74 -0.23 Argentina MerVal 11,400.34 -0.18 Colombia IGBC 8,706.71 0.43 Venezuela IBC 14,372.64 -2.03 Currencies Latest Daily pct change Brazil real 3.9093 -0.42 Mexico peso 18.4425 -0.90 Chile peso 704.7 -1.06 Colombia peso 3,331.61 -0.53 Peru sol 3.4802 -0.12 Argentina peso (interbank) 14.3600 -0.84 Argentina peso (parallel) 14.21 0.35 (Reporting by Bruno Federowski, Jean Luis Arce, and Paula Arend Laier; editing by G Crosse)
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