EMERGING MARKETS-Commodity-linked Latam FX falls; Argentine bonds rally on debt deal

By Ambar Warrick

Aug 4 (Reuters) - Most Latin American currencies were undercut by weakness in commodity markets on Tuesday, while Argentine stocks and bonds rallied after the country struck a deal to restructure $65 billion in sovereign debt.

Argentina said it had reached a deal with three creditor groups, which potentially could help it climb out of a damaging default and revive the recession-hit economy. The country has a total debt pile of $323 billion, around 90% of gross domestic product.

Argentina's Merval stock index .MERV rose nearly 5%, while the peso ARS= showed little reaction to the deal. The currency has been heavily regulated by the government to maintain stability in its currency market.

"The agreement with external bondholders is a welcome development in our view," Goldman Sachs analysts wrote in a note.

"It rules out the possibility of disruptive outcomes associated with a widespread sovereign default, providing some certainty to investors, businesses and households, and hopefully contributing to alleviate some of the pressure on the parallel exchange rate market."

Traders said Argentine bond prices rose 8.1% on average.

The Mexican MXN= and Colombian COP= pesos sank in tandem with oil prices, while weakness in the copper market undercut the Chilean peso CLP=.

Brazil's real BRBY was unchanged ahead of a widely expected interest rate cut on Wednesday, as the country's central bank continues to try and mitigate the impact of the coronavirus.

Data showed that industrial output in the country marked its second-biggest increase ever in June, as the sector continued to claw back from disruptions caused by the pandemic.

Brazil's Bovespa stock index .BVSP was pulled down by heavyweight lender Itau Unibanco Holding ITUB4.SA, after its quarterly profit plunged 40%.

Other stocks markets in the region rose, tracking some positive cues from Wall Street and U.S. manufacturing data.

Chilean stocks rose about 0.8%. The country's central bank is likely to stay pat on its benchmark interest rate, through at least the next 12 months, a central bank poll of traders showed on Tuesday.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1088.89

1.02

MSCI LatAm .MILA00000PUS

2025.64

0.02

Brazil Bovespa .BVSP

102662.87

-0.16

Mexico IPC .MXX

37682.47

0.36

Chile IPSA .SPIPSA

3978.63

0.81

Argentina MerVal .MERV

55730.93

6.146

Colombia COLCAP .COLCAP

1136.55

0.3

Currencies

Latest

Daily % change

Brazil real BRBY

5.3089

0.06

Mexico peso MXN=D2

22.8203

-0.86

Chile peso CLP=CL

764.7

-1.01

Colombia peso COP=

3790.75

-0.82

Peru sol PEN=PE

3.5487

-0.22

Argentina peso (interbank) ARS=RASL

72.5600

-0.06

(Reporting by Ambar Warrick in Bengaluru; Editing by Sandra Maler)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837; Reuters Messaging: ambar.warrick.thomsonreuters.com@reuters.net; Twitter: @AmbarWarrick))

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