July 28, 2017 / 4:16 PM / a year ago

EMERGING MARKETS-Brazil real firms on slowdown in U.S. wage growth

    By Bruno Federowski
    SAO PAULO, July 28 (Reuters) - The Brazilian real
strengthened on Friday after data showing underwhelming wage
gains in the United States reduced bets on another U.S. rate
hike this year.
    The U.S. economy accelerated in the second quarter, matching
analyst expectations, but wage growth slowed and inflation was
limited, putting the Federal Reserve in a tight spot as it looks
to continue raising interest rates.
    The report was the latest to stoke bets on a
slower-than-expected pace of U.S. monetary tightening, an
outlook that has boosted demand for high-yielding emerging
market currencies.
    The Brazilian real firmed 0.4 percent on Friday to
3.14 reais, paring this week's losses to roughly 1 percent. The
currency has struggled to extend recent gains after a four-week
rally drove it to its strongest level in two months.
    The real's strength tracked the global weakness of the U.S.
currency following Friday's data, with the dollar weakening
against a basket of benchmark currencies.
    The Colombian peso firmed as much as 0.9 percent,
also boosted by stronger oil prices and bets that the central
bank will soon halt interest rate cuts. The bank on Thursday
reduced its benchmark rate by 25 basis points to 5.50 percent,
with one of seven policymakers voting to hold.
    "The fact that six board members agreed to slow the easing
pace, and one even wanted to pause, seems like a clear signal
that (the central bank) is preparing to end its easing cycle,"
economists at JPMorgan wrote in a note to clients.
    The Mexican peso was slightly weaker as traders avoided big
bets on further appreciation of the currency, which has been the
region's best performer this year as fears eased over U.S.
President Donald Trump's protectionist pledges.
    Still, traders said the currency could see another rally as
U.S. trade negotiations advance. The International Monetary Fund
on Friday said the peso is undervalued between 5 and 15 percent
in a scenario where protectionist risks don't materialize.

    Brazil's benchmark Bovespa stock index seesawed on a
heavy batch of corporate earnings. Shares of Estácio
Participações SA were the biggest gainers, rising as
much as 7 percent after the for-profit college operator returned
to profit.
    Santander Brasil units, a blend of common and
preferred shares, fell 2.6 percent, among the biggest losers.
Brazil's No. 4 listed bank posted record quarterly earnings but
loan-loss provisions rose, triggering some profit-taking for the
stock, traders said.
    Latin American stock indexes and currencies at 1600 GMT:
 Stock indexes                                daily %    YTD %
                                     Latest    change   change
 MSCI Emerging Markets               1061.98    -0.65    23.97
 MSCI LatAm                          2732.28    -0.13    16.89
 Brazil Bovespa                     65201.82    -0.12     8.26
 Mexico S&P/BVM IPC                 50955.32    -0.59    11.64
 Chile IPSA                          5058.54     0.18    21.85
 Chile IGPA                         25278.83     0.18    21.92
 Argentina MerVal                   21452.45     0.74    26.80
 Colombia IGBC                      10929.98    -0.31     7.92
 Venezuela IBC                     134770.98     0.14   325.08
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.1424     0.41     3.40
 Mexico peso                         17.7525    -0.15    16.85
 Chile peso                              651    -0.27     3.03
 Colombia peso                        3000.5     0.35     0.03
 Peru sol                              3.245     0.00     5.21
 Argentina peso (interbank)          17.7600    -0.62   -10.61
 Argentina peso (parallel)             18.46    -0.22    -8.88
 (Reporting by Bruno Federowski; editing by Grant McCool)
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