July 8, 2016 / 9:52 PM / 2 years ago

EMERGING MARKETS-Brazil real rallies as traders cheer more ambitious fiscal target

(Updates with final prices)
    By Bruno Federowski
    SAO PAULO, July 8 (Reuters) - The Brazilian real rallied by
more than two percent on Friday as traders saw the government's
more ambitious fiscal target for 2017 as a sign of interim
President Michel Temer's commitment to austerity.
    Officials announced a primary deficit goal of 139 billion
reais ($42 billion) for 2017, compared with this year's
estimated gap of 170.5 billion reais. 
    Concerns that Temer's administration could sacrifice fiscal
austerity for support in a divided Congress had contributed to
weakening the real for the five previous trading days.
    "The fiscal target represents a victory of the fiscal hawks
inside the government, which is all the market wants to see,"
said Leme Investimentos partner Paulo Petrassi.
    The positive tone spilled into stock markets, with Brazil's
benchmark Bovespa stock index rising for the third day
in a row.
    Shares of Estácio Participações SA were up 2.6
percent, and Kroton Educacional SA advanced 4.1
percent. Estácio's board is scheduled to meet on Thursday to
discuss a sweetened bid from Kroton, the world's largest
education company by market value.
    The real advanced more than regional peers as
Brazil's central bank refrained from intervening to weaken the
currency after doing so for five straight sessions.
    Latin American currencies in general strengthened on Friday
on a rebound in global risk appetite following
stronger-than-expected U.S. jobs data. 
    The figures are the latest sign of recovery in the world's
biggest economy, but traders bet they will not be enough to
drive the U.S. Federal Reserve to increase interest rates.
    Fed policymakers have repeatedly said they will look for
clarity over the economic fallout from Britain's decision to
leave the European Union before tightening policy.
    Key Latin American stock indexes and currencies at 2128 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets                828.84     0.22     4.37
 MSCI LatAm                          2259.47     2.65    23.48
 Brazil Bovespa                     53140.74     0.77    22.59
 Mexico IPC                         45744.29     0.77     6.44
 Chile IPSA                          4024.96     0.68     9.37
 Chile IGPA                         19898.49     0.71     9.62
 Argentina MerVal                   14689.61    -0.01    25.82
 Colombia IGBC                       9612.51    -0.53    12.46
 Venezuela IBC                      11809.16     0.84   -19.05
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2945     2.12    20.18
 Mexico peso                         18.5035     1.79    -6.88
 Chile peso                            659.5     0.95     7.61
 Colombia peso                        2931.5     1.84     8.11
 Peru sol                              3.282     0.00     4.02

 (Reporting by Bruno Federowski; Additional reporting by Paula
Arend Laier; Editing by Lisa Von Ahn and Sandra Maler)
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