June 20, 2019 / 8:15 PM / a month ago

EMERGING MARKETS-Latam forex, stocks rise as dollar falls on Fed rate cut prospects

 (Updates prices)
    By Susan Mathew
    June 20 (Reuters) - Latin American stocks and currencies
rose on Thursday as the  dollar fell after the U.S. Federal
Reserve signaled it was read to cut interest rates as soon as
July, while rallying oil prices also helped to lift Colombia's
peso.
    Mexico's peso hit a seven-week high before trading
flat against the dollar, which posted its biggest two-day drop
in a year after the Fed's policy statement on Wednesday.
    The Fed joined global peers such as the European Central
Bank and the Reserve Bank of Australia this week in indicating
that more policy stimulus is needed to maintain economic growth.
European Central Bank also struck a dovish tone.

    Markets in Brazil and Argentina were closed for a local
holiday. 
    Net crude exporter Colombia's peso rose 1.5% as oil
prices rallied 5% after Iran shot down a U.S. military drone,
raising fears of a military confrontation between Tehran and
Washington.
    "If we are right that both Fed and ECB will deliver rate
cuts and we will get a trade deal in the second half of 2019, it
is very good news for emerging markets," wrote Vladimir
Miklashevsky, a senior economist at Danske Bank in a note.
    Mexico on Wednesday became the first country to ratify the
United States-Mexico-Canada Agreement agreed late last year to
replace the North American Free Trade Agreement. U.S. and China
negotiators will also renew talks to end a bruising trade war.  
    "A proper bout of EM FX appreciation will also require an
improvement in EM growth, which is hard to see without some
sustained reduction in global trade tensions," analysts at
Goldman Sachs said in a note. 
    Brazil's central bank kept its key rate unchanged as
expected late on Wednesday and held back from signaling looser
policy because of doubts over economic reforms.
 
    Higher copper prices helped both Chile's peso, which
rose 1% on Thursday and looked set to extend gains to a third
session, and stocks. Copper is Chile's main export.

    Stocks in Mexico rose 0.5%, while those in Colombia
 touched their highest since early last month, in line
with world stocks. 
    The director of Latin American sovereign ratings for Fitch
on Wednesday said the credibility of Colombia's fiscal targets
are deteriorating as the economy looks set to grow less than the
government had predicted.
    
    Key Latin American stock indexes and currencies at 1943 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1055.16      1.63
                                        
 MSCI LatAm                    2838.54      1.24
                                        
 Mexico IPC                   43608.37      0.54
                                        
 Chile IPSA                    5049.20      0.31
                                        
 Colombia IGBC                12612.55      0.61
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Mexico peso                   19.0055      0.06
                                        
 Chile peso                      683.4      1.29
                                        
 Colombia peso                 3188.62      1.56
 Peru sol                         3.31      0.57
                                        
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Susan Thomas)
  
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