EMERGING MARKETS-Fed's Yellen speech provides some balm for Latam assets
(Recasts after Yellen speech, updates prices) By Bruno Federowski SAO PAULO, March 29 (Reuters) - Mexico's peso and stock market rose on Tuesday, erasing earlier losses, following comments by Federal Reserve Chair Janet Yellen who said the U.S. central bank should proceed cautiously in deciding to raise interest rates. Latin American currencies had fallen after opening, on fears Yellen could reinforce the Fed's intention to raise rates sooner rather than later, a move which could drain capital away from high-yielding emerging markets. Yet in her first remarks since the Fed opted to hold rates steady two weeks ago, Yellen said inflation has not yet proven durable against the backdrop of looming global risks to the U.S economy, including still-low oil prices and concerns over China. The Mexican peso closed at 17.348 pesos per dollar, up 0.40 percent from the previous day. The benchmark Mexican stock index, the IPC, gained 0.60 percent. In Brazil, where the largest party in Congress announced on Tuesday it was leaving President Dilma Rousseff's governing coalition, the Bovespa stock index also closed up, rising 0.62 percent thanks to Yellen's comments. However, unlike the peso, the Brazilian real failed to rise against the dollar, losing 0.34 percent, after the Brazilian central bank once again acted to weaken the currency. The bank sold hundreds of millions of dollars in reverse currency swaps, which function like buying greenback in futures markets, feeding speculation that it could favor a weaker currency to protect exports. "The central bank is signaling that it will act to contain the real's strength," said Ricardo Gomes da Silva, a trader with Correparti brokerage. The decision by the Brazilian Democratic Movement Party (PMDB) to abandon Rousseff's coalition cripples her fight against impeachment proceedings in Congress. Under Brazil's presidential system, Rousseff will remain in office but the break sharply raises the odds she could be impeached in a matter of months, which would put Vice President Michel Temer, leader of the PMDB, in the presidential seat. Rousseff's chief of staff Jaques Wagner said she will announce a new governing coalition before the end of the week. (Reporting by Bruno Federowski; Additional reporting by Paula Arend Laier; editing by Meredith Mazzilli and Diane Craft)
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