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EMERGING MARKETS-Colombian peso falls from one-month high after recent oil weakness

Credit: REUTERS/LUISA GONZALEZ

Colombia's peso fell for the first time in five days on Thursday as the oil exporter's currency took a hit from recent weakness in crude prices, while Brazil's real firmed the most among Latin American currencies amid optimism over its economic recovery.

By Shreyashi Sanyal

Oct 22 (Reuters) - Colombia's peso fell for the first time in five days on Thursday as the oil exporter's currency took a hit from recent weakness in crude prices, while Brazil's real firmed the most among Latin American currencies amid optimism over its economic recovery.

The peso COP= slipped from a one-month high to fall 0.3% against the dollar as oil prices struggled to stay afloat after higher U.S. gasoline inventories signaled a deteriorating demand outlook. O/R

Colombia recently approved a 314 trillion peso ($81.7 billion) budget for next year, which is the country's biggest ever and 8.3% higher than this year's, but analysts call it a relatively austere sum for 2021.

Economists at Capital Economics note, "the rebound in demand will be held back by limited fiscal support from the government and low oil prices."

The International Monetary Fund said in a report that next year's rebound from a sharp, 8.1% contraction in Latin American and Caribbean economies in 2020 will be partial and uneven, with output not catching up for years and tourism-dependent countries seen struggling the most.

Brazil's real BRBY, BRL= firmed 0.4% as investors remained hopeful of the pace at which the country's economy is recovering. Latest figures have shown a rebound in retail sales, manufacturing, industrial production and international trade.

Latin America's biggest economy also benefited from a pickup in demand in China, its biggest export hub for agricultural products.

However, the country's public finances remain a major sticking point for business confidence as investors raise doubts about the government's ability to fund a new fiscal package.

"The scenario for the public accounts for the next few years is increasingly challenging, as the government is showing a desire to continue to increase spending next year," said Solange Srour, Brazil chief economist at Credit Suisse.

Brazil's government early next month will revise its 2020 gross domestic product forecast, currently a contraction of 4.7%, special secretary at the economy ministry Waldery Rodrigues said.

Mexican annual inflation quickened faster than expected in the first two weeks of October, pushing the rate above the central bank's tolerance threshold, figures from the national statistics office (INEGI) showed. The Mexican peso MXN= rose 0.4%.

Chile's peso CLP= rose, while Argentina's peso ARS=RASL slipped.

Argentina's August economic activity dropped 11.6%, the country's statistics agency said, shallower than the decline a month earlier in July but slightly worse than analyst forecasts.

The MSCI's index for Latin American equities .MILA00000PUS gained 1.1%, supported by a rise in Sao Paulo stocks .BVSP.

Shares in Brazilian motor maker WEG SA WEGE3.SA were up 3%after the company reported a 54% rise in third-quarter profit on Wednesday, as it saw demand for equipment grow.

Key Latin American stock indexes and currencies at 2000 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1135.49

-0.21

MSCI LatAm .MILA00000PUS

1976.92

1.07

Brazil Bovespa .BVSP

101937.12

1.38

Mexico IPC .MXX

38563.40

-0.27

Chile IPSA .SPIPSA

3811.29

0.76

Argentina MerVal .MERV

51482.15

2.782

Colombia COLCAP .COLCAP

1177.89

Currencies

Latest

Daily % change

Brazil real BRBY

5.5930

-0.01

Mexico peso MXN=D2

20.9911

0.51

Chile peso CLP=CL

778.9

0.44

Colombia peso COP=

3782

-0.46

Peru sol PEN=PE

3.6017

-0.14

Argentina peso (interbank) ARS=RASL

78.0600

-0.40

Argentina peso (parallel) ARSB=

186

-1.61

(Reporting by Shreyashi Sanyal in Bengaluru; editing by Jonathan Oatis)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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