January 25, 2019 / 9:43 PM / 3 months ago

EMERGING MARKETS-Latam currencies strengthen, ninth week of gains for Mexican peso

 (Recasts throughout, updates prices)
    By Susan Mathew
    Jan 25 (Reuters) - Latin American currencies firmed against
a sharply weak dollar on Friday, with the Mexican peso posting
its longest streak of weekly gains in almost 18 years.
    The dollar held losses after U.S. President Donald Trump
announced a tentative agreement with lawmakers to end a partial
U.S. government shutdown on the 35th day of the shutdown.

    The greenback had tumbled earlier in the session as traders
turned their focus to next week's U.S. Federal Reserve meeting
when it is expected to keep interest rates unchanged.
    Among regional currencies, the Mexican peso rose 0.2
percent and posted its ninth straight week of gains - the peso's
the longest run of weekly gains since April 2001.  
    Positive steps taken by the new Mexican government on a
canceled airport project and more-conservative-than-expected
budget and a rate hike by the central bank were some of the
factors that spurred the weekly rally in the peso since last
month.
    Financial markets in Brazil were closed for a local holiday.
On Thursday, the real ended the week lower, while the
Bovespa stock index posted its fifth straight week of
gains. 
    The Argentine peso rose more than 1 percent despite
the central bank's attempt to control its gains.  
    The country's central bank bought $50 million in the foreign
exchange market on most days this week aimed at controlling the
strength of the peso in order to keep it within the trading band
agreed with the International Monetary Fund.
    "We expect the central bank to announce an increase in the
daily intervention amount up to $100 million (initially) and a
reduction of the non-intervention band slope to around 1.5
percent," Morgan Stanley analysts said in a note. 
    "We believe that this would likely happen before the end of
1Q19 and it should help to anchor the disinflationary process,"
they said.    
    Higher copper prices aided a rise in the Chilean peso
which notched its fourth straight week of gains. The Colombian
peso rose on the day but fell for the first time in four
weeks, mirroring a weekly loss in oil prices.
    Among stocks, Mexican shares closed slightly higher
after slipping into the red for a while in the session. Over the
week, the IPC index broke a three-week winning streak and fell
about 1.5 percent. 
    Other bourses rose on Friday, except Argentine stocks
 which finished 0.4 percent lower.  
    Looking forward, market participants are expected to remain
cautious, particularly now that geopolitical tensions have begun
to re-emerge due to Venezuela's internal crisis, analysts at
Banco Base said, noting the impact this would have on oil
prices.
    
    Key Latin American stock indexes and currencies at 2130 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1032.34      1.27
                                        
 MSCI LatAm                    2878.41      0.06
                                        
 Mexico IPC                   43591.68      0.06
                                        
 Chile IPSA                    5441.72       0.5
                                        
 Argentina MerVal             34810.51     -0.37
                                        
 Colombia IGBC                11771.79      0.46
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Mexico peso                   18.9860      0.17
                                        
 Chile peso                      667.1      0.67
                                        
 Colombia peso                 3150.49      0.60
 Peru sol                        3.343      0.12
                                        
 Argentina peso                37.0300      1.08
 (interbank)                            
                                        
 

 (Reporting by Susan Mathew in Bengaluru; Editing by Cynthia
Osterman)
  
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