October 17, 2016 / 2:32 PM / a year ago

EMERGING MARKETS-Brazil real, Mexico peso firm on U.S. data, Yellen comments

By Bruno Federowski
    SAO PAULO, Oct 17 (Reuters) - The Brazilian and Mexican
currencies strengthened on Monday as weak U.S. economic figures
and comments by Federal Reserve Chair Janet Yellen boosted
expectations that interest rates will stay low for longer.
    U.S. industrial production barely rose in September,
suggesting a modest acceleration in economic growth in the third
    The figures came after Yellen said on Friday the Fed may
need to run a "high-pressure economy" to reverse damage from the
financial crisis.
    Her remarks raised speculation that Yellen may be willing to
let inflation run above the bank's 2 percent target, keeping
monetary policy loose for a long time.
    Keeping U.S. rates low would benefit riskier emerging market
assets, which tend to lure foreign investors with the promise of
higher returns.
    The Mexican peso was the biggest gainer in the
region as traders bet that Republican U.S. presidential nominee
Donald Trump, who has pledged to curtail trade and financial
flows with Mexico, will lose the election.
    Sentiment was somewhat mixed in stock markets as traders
feared U.S. economic weakness could hurt Latin American exports.
    Brazil's benchmark Bovespa stock index rose 0.4
percent, but gains were limited by falling shares of health
insurance company Qualicorp SA. 
    Brazil's central bank will announce its next interest rate
decision on Wednesday after markets close. Bets on a rate cut of
50 basis points have grown since Friday, when state-controlled
oil company Petróleo Brasileiro SA  
announced it was lowering domestic fuel prices.

    Key Latin American stock indexes and currencies at 1410 GMT:
 Stock indexes                               daily %    YTD %
                                              change   change
 MSCI Emerging Markets               894.32     -0.3    12.96
 MSCI LatAm                         2506.11      0.4    36.41
 Brazil Bovespa                    62034.49     0.43    43.10
 Mexico IPC                        47730.86     0.06    11.06
 Chile IPSA                         4150.04     0.21    12.77
 Chile IGPA                        20787.70      0.2    14.52
 Venezuela IBC                     13442.24    -0.81    -7.86
 Currencies                                  daily %    YTD %
                                              change   change
 Brazil real                         3.1945     0.27    23.56
 Mexico peso                        18.8675     0.81    -8.68
 Chile peso                           670.3    -0.01     5.88
 Peru sol                             3.392     0.27     0.65
 Argentina peso (interbank)         15.1800    -0.03   -14.48
 Argentina peso (parallel)            15.55     0.00    -8.23

 (Reporting by Bruno Federowski; Editing by Meredith Mazzilli)
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