EMERGING MARKETS-Brazil real up on hopes of political change despite cenbank action
By Bruno Federowski SAO PAULO, March 18 (Reuters) - The Brazilian real strengthened on Friday on hopes that a change in government could lay the groundwork for an economic recovery, even after the central bank announced it would reduce its support for the currency. Brazil's lower house launched on Thursday impeachment proceedings against leftist President Dilma Rousseff by approving a committee of 65 members that will assess the possibility of her ouster. Opposition parties tried to speed the process by holding a congressional session on Friday, when most lawmakers are usually away from Brasilia. The moves come amid massive protests against Rousseff. On Friday, riot police dispersed protesters in São Paulo's main avenue, hours before planned pro-government demonstrations. "As tension keeps rising, we believe that an eventual resolution to the stalemate is moving closer ... but the process is unlikely to be smooth or linear," analysts with Morgan Stanley wrote in a client note. The Brazilian real has jumped about 10 percent against the U.S. dollar so far this month, also lifted by the U.S. Federal Reserve's forecast of a softer path of rate hikes. That led Brazil's central bank on Thursday to announce that it would reduce the rollover of about $110 billion in currency swaps it currently has in its books. "Given the very weak macro fundamentals and lingering political uncertainty, the economy would benefit from a currency that is moderately cheap," Goldman Sachs economists wrote in a note. "The last thing the real sector and the slowly recovering export sector need now is to go back to a period of currency over-valuation." The benchmark Bovespa stock index fell on profit-taking after closing the previous session with its biggest one-day gain since 2009, but eyed its fourth weekly advance in a row. Financial shares, as well as stocks from state-controlled companies, weighed on the index on Friday after benefiting strongly from bets on political change. Shares of Usinas Siderurgicas de Minais Gerais SA were flat after Brazilian and Japanese creditors agreed to give the steelmaker a grace period of 120 days. The move avoids a short-term pitfall but does not guarantee long-term sustainability, BTG Pactual analysts wrote in a note. Key Latin American stock indexes and currencies at 1635 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 826.99 1.24 2.87 MSCI LatAm 2140.78 0.09 16.89 Brazil Bovespa 50321.72 -1.16 16.08 Mexico IPC 45972.66 1.18 6.97 Chile IPSA 3936.67 0.99 6.97 Chile IGPA 19257.64 0.87 6.09 Argentina MerVal 12910.35 -0.47 10.58 Colombia IGBC 9618.26 0.12 12.53 Venezuela IBC 14991.00 0 2.76 Currencies daily % YTD % change change Latest Brazil real 3.6190 0.87 9.06 Mexico peso 17.2765 0.24 -0.27 Chile peso 675.5 -0.87 5.06 Colombia peso 3079.89 -0.34 2.90 Peru sol 3.3781 -0.27 1.06 Argentina peso (interbank) 14.8500 0.67 -12.58 Argentina peso (parallel) 15.48 0.65 -7.82 (Reporting by Bruno Federowski; Additional reporting by Paula Arend Laier; Editing by Meredith Mazzilli)
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