October 25, 2018 / 3:03 PM / a month ago

EMERGING MARKETS-Latam currencies stable on gains in Brazil's real, Mexican peso

    By Aaron Saldanha
    Oct 25 (Reuters) - Latin American currencies recovered from
early losses on Thursday as Brazil's real and Mexico's peso
gained against a stronger dollar, with risk sentiment toward the
two countries improved.
    MSCI's index of Latin America stocks rose
0.5 percent, while the regional currency index
erased earlier losses to trade flat.
    The real gained half a percent while Mexico's peso
 was up 0.6 percent, coming off the more than
one-and-a-half-month lows hit on Wednesday.
    Gabriela Siller, director of financial and economic analysis
at Banco BASE, said a return of risk appetite was a factor in
the appreciation of the peso and real.
    Brazil is headed for a presidential election run-off on
Sunday. Polls show far-right candidate Jair Bolsonaro, the
favorite of investors, likely to defeat leftist Fernando Haddad.
    
    "There is a lot of optimism in Brazilian assets, overall,"
said Mauricio Oreng, senior Brazil strategist with Rabobank.
    "There could be some downside (for the real), but that would
depend on the policies of the new administration ... if
Bolsonaro wins. Given the signs so far, the markets are
constructive."
    Stocks in Brazil, Latin America's largest economy,
were up 1 percent on Thursday, exceeding the 0.4 percent gain
seen in Mexico's equity benchmark.      
    Banco BASE's Siller, however, cautioned that the greatest
risks to the peso at the moment relate to uncertainty about
public policies and the way in which the country's next
government could make decisions.
    The most immediate test for the incoming administration is
what to do about an airport in Mexico City that is under
construction. Its fate depends partly on the result of a public
consultation, called by President-elect Andres Manuel Lopez
Obrador (AMLO), that runs through Sunday.
    Obrador believes the project will come in over budget and
has been tainted by corruption, and has called for the
consultation to help decide if it should be finished or an
existing military base should be updated.     
    In broader Latin America, Argentina's peso gained
about 0.4 percent, while Colombia's peso recovered from
initial losses which saw it trade at its weakest levels since
November 2016.
    Colombian stocks were 1.9 percent higher, on track
for their best session in about one and a half months.
     
    
    Key Latin American stock indexes and currencies at 0205 GMT
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets          947.09     -0.63    -17.73
                                                  
 MSCI LatAm                    2644.62      0.46     -6.92
                                                  
 Brazil Bovespa               83891.37         1      9.80
                                                  
 Mexico IPC                   46136.39      0.39     -6.52
                                                  
 Chile IPSA                    5132.59     -0.15     -0.15
                                                  
 Argentina MerVal             28157.43         0     -6.35
                                                  
 Colombia IGBC                12501.90      1.92      9.95
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.7174      0.74    -10.87
                                                  
 Mexico peso                   19.5080      0.47      0.98
                                                  
 Chile peso                      688.6      0.03    -10.74
                                                  
 Colombia peso                 3164.36      0.02     -5.76
 Peru sol                         3.34      0.06     -3.08
                                                  
 Argentina peso                36.8500      0.81    -49.53
 (interbank)                                      
                                                  
 Argentina peso                  36.75      0.68    -47.67
 (parallel)                                       
                                                  
 

 (Reporting by Aaron Saldanha in Bengaluru
Editing by Paul Simao)
  
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