May 28, 2019 / 8:10 PM / a month ago

EMERGING MARKETS-Latam FX broadly softer, Brazil's real firms

 (Recasts, updates prices, adds market strategist quote)
    By Aaron Saldanha
    May 28 (Reuters) - Most Latin American currencies softened
against the dollar on Tuesday as fears over the U.S.-China trade
war cast a pall on risk sentiment, while a Latin American stocks
index rose, underpinned by gains in Brazil.
    U.S. President Donald Trump said on Monday he was not ready
to make a trade deal with China, but expected one in the future.
The dollar firmed against a basket of currencies on Tuesday,
lifted by trade and political worries.
    MSCI's Latin American currencies index
dipped 0.4%, while its Latin American stocks index
 was up 0.2% as stocks in index heavyweight
Brazil rose.
    Brazilian assets were outliers to the regional norm on the
increased likelihood a decree to revamp Brazil's executive
branch will pass.  
    President Jair Bolsonaro convinced his party to vote for the
 decree, averting a potential crisis that had sown doubt about
his ability to obtain congressional backing he needs to push
through legislation.
    The real firmed 0.6%, while yields on local 10-year
bonds dipped 2 basis points to 8.78%.    
    "We've seen the currency become more sensitive to interest
rate differentials than it has been over the last couple of
months," said Christian Lawrence, senior market strategist at
Rabobank. 
    "It's become more sensitive to data releases, but that's
really via the channel of interest rates where we've certainly
seen correlation between the currency and interest rates rise
quite markedly in recent sessions."
    The Bovespa index rose 1.3% on broad-based gains.
    Petroleo Brasileiro SA's (Petrobras) common shares
 and preferred shares rose 0.5% and 1.1%,
respectively. 
    The state-run oil firm is nearing the sale of two oilfields
in a process that could fetch around $1 billion and has set a
June 5 deadline to receive final binding offers, two sources
said.
    Rodrigo Maia, the speaker of Brazil's lower house, said he
is negotiating additional clauses to a bill in Congress to solve
the so-called transfer-of-rights issue with
Petrobras.
    The Mexican peso softened 0.6%, while stocks
edged up. 
    Chile's peso slumped 1.5%, set for its weakest
closing level since February 2016, falling prey to the stronger
greenback. Chile will be hit by a worsening U.S.-China trade war
as it is a major exporter of copper.     
    Argentina's stocks fell 2.4%, while the peso
firmed about 0.9% to levels last seen nearly a week ago.   

    Latin American stock indexes and currencies at 1940 GMT
    
 Stock indexes                                    daily
                                                      %
                                       Latest    change
 MSCI Emerging Markets                   987.31   -0.19
 MSCI LatAm                             2614.13    0.21
 Brazil Bovespa                        96064.52    1.27
 Mexico IPC                            42541.24    0.12
 Chile IPSA                             4848.89   -0.03
 Argentina MerVal                      34616.58   -2.35
 Colombia IGBC                         11875.48   -1.47
                                                       
 Currencies                                       daily
                                                      %
                                                 change
                                         Latest  
 Brazil real                             4.0204    0.36
 Mexico peso                            19.1770   -0.65
 Chile peso                                 707   -1.20
 Colombia peso                          3371.86   -0.43
 Peru sol                                 3.353   -0.03
 Argentina peso (interbank)             44.6750    0.73
                                                 
 
 (Reporting by Aaron Saldanha and Susan Mathew in Bengaluru;
Editing by Dan Grebler)
  
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