May 31, 2016 / 3:17 PM / 2 years ago

EMERGING MARKETS-Colombia peso weakens after cenbank back off intervention

By Bruno Federowski
    SAO PAULO, May 31 (Reuters) - The Colombian peso weakened on
Tuesday after the country's central bank announced it would
suspend an intervention policy aimed at slowing the currency's
    The central bank said on Friday it would not hold any
additional dollar option sales, but did not fully rule out
further intervention. 
    The bank also increased its benchmark interest rate for a
ninth consecutive month on Friday, to 7.25 percent, confirming
the expectations of most analysts in a Reuters poll. 
    The Colombian peso has weakened more than 8 percent
so far this month to its lowest since early April. Expectations
of higher U.S. interest rates and a decline in the price of oil,
a key export and source of tax revenue, weighed on the currency.
    "This announcement eliminates a source of risk when taking
on USD/COP positions and should therefore expedite the COP
depreciation path," Nomura Securities strategist Mario Castro
wrote in a client note.
    Colombian markets were closed on Monday due to a local
    The Brazilian real also weakened on Tuesday after the
release of leaked recordings resulted in a minister quitting
interim President Michel Temer's administration, the second such
departure since he took over from leftist Dilma Rousseff this
    Investors worry political instability could weaken the
government's ability to gain lawmaker support for austerity
measures as Latin America's biggest economy battles a deep
recession and stubbornly high inflation.
    Brazil's benchmark Bovespa stock index, however,
inched up, supported by a recovery in oil prices.
    Shares of Petróleo Brasileiro SA rose 0.7 percent
after the state-controlled oil company's board formally elected
well-respected executive Pedro Parente as chief executive
officer late on Monday. 
    Stocks of Fibria SA jumped to a two-month high
and posted the biggest gain in the index. The world's largest
producer of eucalyptus pulp increased production forecasts for
its new Horizonte 2 plant and raised the possibility of slower
capital spending on the project. 
    Key Latin American stock indexes and currencies at 1500 GMT:
 Stock indexes                              daily %    YTD %
                                             change   change
 MSCI Emerging Markets              809.38     0.21      1.7
 MSCI LatAm                        2057.69    -0.08    12.55
 Brazil Bovespa                   48984.12     0.04    13.00
 Mexico IPC                       45796.09    -0.48     6.56
 Chile IPSA                        3949.80        0     7.33
 Chile IGPA                       19477.72    -0.01     7.31
 Argentina MerVal                 12884.48     1.06    10.36
 Colombia IGBC                     9716.27     0.43    13.68
 Venezuela IBC                    15146.80    -1.98     3.83
 Currencies                                 daily %    YTD %
                                             change   change
 Brazil real                        3.6010    -0.66     9.61
 Mexico peso                       18.4060     0.42    -6.39
 Chile peso                          688.9     0.23     3.02
 Colombia peso                        3090    -0.93     2.57
 Peru sol                           3.3749    -0.32     1.16
 Argentina peso (interbank)        14.0000    -0.14    -7.27
 Argentina peso (parallel)           14.51     0.90    -1.65

 (Por Bruno Federowski; Editing by Dan Grebler)
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