EMERGING MARKETS-Mexico, Colombia peso rebound from lows but risks linger
By Bruno Federowski SAO PAULO, Feb 12 (Reuters) - Mexico's peso clawed back gains from a record low on Friday after brutal losses during the week as a rebound in oil prices and global stocks lifted battered Latin American currencies. Solid U.S. consumer data on Friday helped stocks on Wall Street rebound while oil prices, which have driven the fortunes of oil producers like Mexico and Colombia, surged back from 12-year lows on a report that suggested OPEC might finally agree to cut production to reduce the world glut. Colombia's peso also recovered from an all-time low, but analysts saw the rebound among emerging market assets as possibly short-lived due to worries about a U.S. recession. Strategists at Citigroup expect concerns about the strength of the U.S. economy to continue to hurt the Mexican peso, since Latin America's No. 2 economy sends nearly 80 percent of its exports to its northern neighbor. "What used to be Mexico's strength - trade linkages with the U.S. - is now turning into a source of vulnerability as U.S. recession risks rise," Citigoup strategists wrote in a note to clients. Mexico's peso gained 1.3 percent, breaking back below the 19 per dollar level after hitting its weakest since a 1993 revaluation on Thursday. Concerns over the global economy persisted ahead of the reopening of Chinese markets on Monday after a week-long holiday for the Lunar New Year. Many investors who hold Latin American bonds have been selling the highly liquid Mexican peso to hedge against further volatility, driving the currency to underperform its regional peers. The currency has weakened more than 9 percent so far this year, even more than oil-heavy Colombia's peso, which is down about 6 percent. The Mexico peso's deep losses has fostered talk that the country's central bank raise might interest rates to try and support the currency, but Morgan Stanley analysts said in a client note the central bank is more likely to hold additional dollar sales. Mexican Finance Minister Luis Videgaray said on Friday that Mexico planned to continue selling up to $400 million a day in auctions. But he said authorities were closely watching and could change the regime "if conditions change." The Chilean central bank left its benchmark rate at 3.50 percent Thursday but indicated further hikes are probable as the Chilean peso hovers near 13-year lows. The Chilean peso firmed sharply. Brazil's Bovespa benchmark stock index rose as higher oil prices lifted shares of state-controlled oil company Petroleo Brasileiro SA. Latin American stock indexes and currencies at 2300 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 711.24 -0.25 -10.44 MSCI LatAm 1688.04 0.93 -7.75 Brazil Bovespa 39808.05 1.25 -8.17 Mexico IPC 42416.44 0.13 -1.31 Chile IPSA 3667.47 0.45 -0.35 Chile IGPA 18031.60 0.47 -0.66 Argentina MerVal 11276.39 2.41 -3.42 Colombia IGBC 8799.16 0.88 2.95 Venezuela IBC 14704.83 0.76 0.80 Currencies daily % YTD % change change Latest Brazil real 3.9889 -0.17 -1.05 Mexico peso 18.9105 1.29 -8.89 Chile peso 704.38 1.16 0.76 Colombia peso 3382 1.67 -6.29 Peru sol 3.5062 -0.06 -2.63 Argentina peso 14.7200 -0.54 -11.80 (interbank) Argentina peso 14.9 -2.68 -4.23 (parallel) (Reporting by Michael O'Boyle in Mexico City and Bruno Federowski in Sao Paulo; Editing by Tom Brown)
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