June 5, 2017 / 3:28 PM / a year ago

EMERGING MARKETS-Mexico peso rallies after key state vote; Brazil real drops

    By Bruno Federowski
    SAO PAULO, June 5 (Reuters) - The Mexican peso firmed to its
strongest level in seven months on Monday after the ruling party
fended off a leftist challenge in a key state election, reducing
expectations of a defeat in the presidential elections next
    The Institutional Revolutionary Party (PRI) looked set to
maintain its nine-decade hold over the central State of Mexico,
the country's most populous, with a narrow lead over the leftist
National Regeneration Movement (MORENA).
    A defeat in the state would be seen as a blow to PRI's 2018
presidential campaign, strategists at BNP Paribas wrote in a
note to clients. Still, the results are far from an early
victory, with polls showing Andres Manuel Lopez Obrador, a
contender for MORENA, as the front-runner.
    A Nomura Securities poll with 87 clients on March 30
indicated the Mexican peso could weaken 3.4 percent in
the case of a MORENA victory.
    On Monday, the peso strengthened as much as 2 percent to the
strongest since Nov. 9, after the surprise election of U.S.
President Donald Trump.
    In contrast, the Brazilian real weakened 1 percent
ahead of a key electoral court decision on Tuesday that could
oust President Michel Temer, whose ambitious reform agenda has
helped rekindle investor confidence. 
    A former lawmaker and close aide to Temer was arrested on
Saturday as part of a corruption probe that also targets the
president, adding to calls for his ouster and fueling investor
concerns over potential delays to the implementation of
structural reforms.
    Key Latin American stock indexes and currencies at 1615 GMT:
 Stock indexes                                daily %    YTD %
                                     Latest    change   change
 MSCI Emerging Markets               1017.02     0.19    17.72
 MSCI LatAm                          2532.68    -0.51     8.76
 Brazil Bovespa                     62338.82    -0.27     3.51
 Mexico IPC                         49363.47     0.09     8.15
 Chile IPSA                          4881.90    -0.35    17.60
 Chile IGPA                         24476.38    -0.33    18.05
 Argentina MerVal                   22425.60    -0.41    32.56
 Colombia IGBC                      10702.68      0.2     5.67
 Venezuela IBC                      78288.69     0.19   146.93
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2864    -1.01    -1.13
 Mexico peso                         18.3655     1.77    12.95
 Chile peso                            668.5     0.15     0.33
 Colombia peso                       2893.65    -0.09     3.73
 Peru sol                               3.27     0.06     4.40
 Argentina peso (interbank)          16.0450    -0.22    -1.06
 Argentina peso (parallel)             16.26     0.37     3.44

 (Reporting by Bruno Federowski; Editing by Frances Kerry)
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