September 28, 2018 / 12:00 AM / 24 days ago

EMERGING MARKETS-Brazil real firms past 4.00, Argentine peso continues decline

    By Bruno Federowski and Anthony Esposito
    BRASILIA/MEXICO CITY, Sept 27 (Reuters) - The Brazilian real
on Thursday strengthened past 4 to the dollar in intraday trade,
leading gains among Latin American currencies as traders
continued to unwind short bets amid speculation over the outcome
of this year's presidential elections.
    The Argentine peso, however, continued to drop as investors
worried that a revised $57 billion program with the
International Monetary Fund, which assured the government's
funding until the end of next year, could hurt the ailing
economy and leave foreign exchange markets volatile.

    "The initial market reaction to yesterday's (IMF)
announcement is mixed," said Grupo SBS in a note to clients.
    The Argentine peso tumbled 2.65 percent.
    Anxiety in Brazil around next month's vote drove the real
currency to boomerang in recent weeks, battered by near-daily
voter intention polls.
    It approached all-time lows as traders feared the next
president could fail to curb ballooning public debt, but bounced
back in recent days as far-right lawmaker Jair Bolsonaro seemed
to consolidate its lead in a first-round vote.
    Yet Bolsonaro, who has tapped a University of
Chicago-trained banker as an economic adviser, would probably
have difficulty beating his main rival, leftist Fernando Haddad,
who is backed by jailed former President Luiz Inacio Lula da
Silva.
    Traders say volatility is likely to stay high even after the
vote as clarity over what the next president will manage to
achieve is unlikely to emerge anytime soon.
    "We're at peak volatility right now but that doesn't mean
that once the winner is known, everything will be smooth
sailing," a portfolio manager at a Rio de Janeiro asset manager
said.
    The real firmed 0.78 percent, the best-performing
currency in Latin America, though it shed some of its earlier
gains. Meanwhile, Brazil's benchmark stock index rose
1.44 percent, led by shares in Petroleo Brasileiro SA
, or Petrobras as the company is known.
     Petrobras shares were up 6.3 percent in afternoon trading,
after the firm agreed to pay an $853.2 million fine to settle
charges that former executives and directors of the state-run
Brazilian oil company broke U.S. anti-corruption laws by bribing
politicians and then seeking to conceal the
payments.
    It was the latest milestone for the company in turning the
page on the landmark "Car Wash" investigation.
    Other markets in the region mostly rose, extending the
previous day's gains after the U.S. Federal Reserve raised
interest rates and left intact plans to steadily tighten
monetary policy.
    The U.S. central bank foresees another rate hike in
December, three more next year, and one increase in 2020. Some
investors had expected the bank to predict more rate hikes,
which could dampen demand for high-yielding assets.
    The Mexican peso gained 0.24 percent, even as
uncertainty surrounding the renegotiation of the North American
Free Trade Agreement (NAFTA) weighed on sentiment.
    The prospects for a quick deal to update NAFTA appeared to
dim on Wednesday after U.S. President Donald Trump blasted
Canada's stance and threatened to impose tariffs on cars
imported from Canada.
    Key Latin American stock indexes and currencies at 1950 GMT:
    
 Stock indexes                               daily %     YTD %
                                 Latest       change    change
 MSCI Emerging Markets             1050.74      0.45     -9.71
                                                      
 MSCI LatAm                        2584.41      1.95    -10.37
                                                      
 Brazil Bovespa                   79789.77      1.44      4.43
 Mexico IPC                       49662.06      0.11      0.62
 Argentina MerVal                 33706.13      -0.7     12.11
                                                      
 Colombia IGBC                    12388.87      0.58      8.95
                                                      
 Venezuela IBC                   320899.56     -0.11    912.13
                                                              
 Currencies                                  daily %     YTD %
                                              change    change
                                    Latest            
 Brazil real                        3.9932      0.78    -17.03
                                                      
 Mexico peso                       18.8065      0.24      4.75
                                                      
 Chile peso                         659.68      0.32     -6.83
                                                      
 Colombia peso                     2985.05      0.42     -0.10
 Peru sol                            3.299      0.09     -1.88
                                                      
 Argentina peso (interbank)        39.6000     -2.65    -53.03
                                                      
 Argentina peso (parallel)           38.25      0.00    -49.73
                                                      
 
 (Reporting by Bruno Federowski in Brasilia and Anthony Esposito
in Mexico City
Editing by Alistair Bell and Sandra Maler)
  
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