October 12, 2018 / 8:02 PM / 2 months ago

EMERGING MARKETS-Latam FX steady as dollar rises, but set to log weekly gains

    Oct 12 (Reuters) - Most Latin American currencies steadied
on Friday, giving up some gains from earlier in the session as
the dollar gained momentum on a rebound in Wall Street after its
two-day slide.
    But they were still on-course to post weekly gains, bucking
a broader developing market gloom, with MSCI's index of emerging
Latin American currencies poised to log a weekly
gain for a fourth straight week. 
    The outperformance can be attributed to gains in Brazil due
to optimism on the presidential election, and in Argentina on
the country's attempts to shore up its currency and bolster its
finances.    
    The dollar gained on Friday, as U.S. and global equity
prices recovered, while robust Chinese export figures soothed
some worries about the world's second-biggest economy and its
trade war with Washington.
    This took a toll on the Argentine peso which pared
gains and closed weaker ahead of a local holiday on Monday,
while Mexico's currency sustained its gains. 
    The Argentine peso had strengthened on most days in October
after the recession-racked country struck a funding deal with
the International Monetary Fund and committed to implement
economic reforms following the deal.
    The central bank placed more than 100 billion pesos ($2.85
billion) in short-term notes, or Leliqs, on Friday, completing
two full weeks of note sales, at rates as high as 74 percent,
aimed at encouraging investment in peso-denominated assets and
reducing peso liquidity.
    Analysts have repeatedly warned of the lack of
sustainability of this mechanism at the sky-high rates at which
they are being issued as it may lead to indebtedness of the
central bank increasing unsustainably.
    Financial markets in Brazil were closed for a local holiday.
The real posted a fourth straight week of gains, and
stocks clocked weekly gains for a second consecutive
week.
    The assets were buoyed by optimism of possible economic
reforms by a new government as presidential front-runner Jair
Bolsonaro kept his lead and looked poised to win the election.

    MSCI's Latin American stock index was also
set to log weekly gains for a fourth straight week, with Buenos
Aires' Merval index's more than 5 percent rise on Friday
contributing to the gains.
    Mexico's IPC, however, turned to losses and hit a
more than three-month low, after having gained more than 1
percent earlier in the session. 
    
    Key Latin American stock indexes and currencies at 1913 GMT:
 Stock indexes                           Daily %      YTD %
                                Latest    change     change
 MSCI Emerging Markets           954.66    -3.15     -17.59
                                                  
 MSCI LatAm                     2666.38    -0.95      -5.72
                                                  
 Mexico IPC                    47424.93    -0.28      -3.91
                                                  
 Chile IPSA                     5147.64    -0.41      -0.41
                                                  
 Argentina MerVal              29074.99     5.29      -3.29
                                                  
 Colombia IGBC                 12329.33     0.43       8.43
                                                  
                                                           
 Currencies                              Daily %      YTD %
                                          change     change
                                 Latest           
 Mexico peso                    18.8650     0.60       4.42
                                                  
 Chile peso                       679.5     0.34      -9.54
                                                  
 Colombia peso                     3094    -0.18      -3.62
 Peru sol                         3.334    -0.18      -2.91
                                                  
 Argentina peso (interbank)     36.6000     0.14     -49.18
                                                  
 Argentina peso (parallel)        37.25     0.67     -48.38
                                                  
 

    
 (Reporting by Susan Mathew in Bengaluru;
Editing by Phil Berlowitz)
  
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