EMERGING MARKETS-Colombian peso rises after central bank signals support
By Bruno Federowski SAO PAULO, Feb 22 (Reuters) - The Colombian peso strengthened to a two-week high on Monday after the central bank signaled it is ready to support the currency to avoid additional price pressures. Colombia's central bank announced late on Friday it will auction $500 million in dollar call options whenever the currency falls 3 percent from its 20-day moving average, down from the previous 5 percent trigger. Analysts cheered the bank's willingness to act but said that intervention should be rare. They noted that the peso has rarely moved by 3 percent from its 20-day moving average in recent months. So far, the mechanism has never been activated. On Friday, the central bank also raised its benchmark rate by 25 basis points, to 6.25 percent, and kept the door open for further tightening as had been expected. The moves echoed measures adopted by Mexico's government last week, including dollar sales in the spot market, budget cuts and an unexpected rate hike. J.P. Morgan analyst Ben Ramsey said in a client note he expects Colombia's central bank to increase its benchmark rate again by 25 basis points in March and April, which would allow it to cut rates by 125 basis points between September 2016 and January 2017. The Mexican and Colombian pesos have been hard hit by slumping oil prices, which have weighed on trade and tax revenue and pressured inflation expectations. A recovery in crude prices on Monday helped rekindle demand for emerging-market assets, after the world's oil consumer body said it expected U.S. shale production to fall this year and in 2017. Also helping sentiment was a Chinese stock rally following the announcement that the country had decided to replace its top securities regulator. The move followed comments by senior policymakers signaling China could bolster its efforts to stave off financial turmoil. Global risk appetite lifted the Brazilian real beyond 4 to the U.S. dollar as it continued to outperform its peers. A drop of more than 30 percent in the real last year has helped Brazil's current account recover more quickly than expected, despite political turmoil and a deep recession. Latin American stock indexes and currencies at 1440 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 750.04 1.22 -6.69 MSCI LatAm 1817.57 3.75 -4.26 Brazil Bovespa 42944.16 3.37 -0.94 Mexico IPC 43782.85 0.94 1.87 Chile IPSA 3771.27 0.43 2.47 Chile IGPA 18480.84 0.38 1.81 Argentina MerVal 12229.84 3.41 4.75 Colombia IGBC 9094.48 0.79 6.40 Venezuela IBC 16357.04 0.04 12.12 Currencies daily % YTD % change change Latest Brazil real 3.9493 1.85 -0.06 Mexico peso 18.0815 0.79 -4.71 Chile peso 691.52 1.23 2.63 Colombia peso 3316.2 1.14 -4.43 Peru sol 3.522 -0.17 -3.07 Argentina peso (interbank) 15.1000 -0.20 -14.02 Argentina peso (parallel) 15.3 0.33 -6.73 (Reporting by Bruno Federowski; Editing by Paul Simao)
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