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EMERGING MARKETS-Latam currencies, stocks rally as Fed lifts rate cut hopes

Credit: REUTERS/Jose Luis Gonzalez

Most Latin American currencies firmed on Thursday as the U.S. dollar remained on the backfoot after the Federal Reserve boosted bets of an interest rate cut as early as next month.

June 20 (Reuters) - Most Latin American currencies firmed on Thursday as the U.S. dollar remained on the backfoot after the Federal Reserve boosted bets of an interest rate cut as early as next month.

Emerging market assets rallied, with the MSCI's index of Latin American stocks .MILA00000PUS gaining 1.3% and the region's currencies index .MILA00000CUS rising over 1%.

However, trading volumes were thin as markets in Brazil, which have a big impact on the indexes, and Argentina were closed for Corpus Christi day.

Boosting appetite for risky assets, the Fed on Wednesday signaled interest rate cuts this year, saying it is ready to battle growing global and domestic economic risks as it took stock of rising trade tensions and growing concerns about weak inflation.

Mexico's peso MXN= touched over a seven-week high against the dollar, while the country's main IPC stock index .MXX jumped, led by a 2.6% gain for airport operator Grupo Aeroportuario del Pacifico GAPB.MX.

Mexico on Wednesday became the first country to ratify the United States-Mexico-Canada Agreement (USMCA) agreed late last year to replace the North American Free Trade Agreement (NAFTA) at the behest of U.S. President Donald Trump.

However, analysts pointed to caution about reaching an agreement with the United States.

"The agreement's main hurdle is still in the U.S., where it is unlikely the Democrat-controlled House of Representatives will approve it this year (a 35% probability)," analysts at Eurasia Group wrote in a note.

"As the U.S. presidential elections ramp up and the tensions between Democrats and the White House increase, it will become more difficult for the USMCA to be approved."

Chile's peso CLP= gained over 1%, tracking a gain in the price of copper CMCU3, the country's top export. MET/L

Colombia's peso COP= firmed more than 1%, while local stocks .IGBC posted similar gains, with energy firm Ecopetrol SA ECO.CN riding on the back of higher lower oil prices LCOc1. O/R

Key Latin American stock indexes and currencies at 1425 GMT

Stock indexes

Latest

daily % change

MSCI Emerging Markets .MSCIEF

1055.82

1.69

MSCI LatAm .MILA00000PUS

2840.27

1.3

Brazil Bovespa .BVSP

-

-

Mexico IPC .MXX

43845.70

1.08

Chile IPSA .SPIPSA

5044.43

0.18

Argentina MerVal .MERV

-

-

Colombia IGBC .IGBC

12678.55

1.13

Currencies

Latest

daily % change

Brazil real BRBY

-

-

Mexico peso MXN=D2

18.9680

0.26

Chile peso CLP=CL

683.6

1.26

Colombia peso COP=

3204.1

1.07

Peru sol PEN=PE

3.312

0.51

Argentina peso (interbank) ARS=RASL

-

-

(Reporting by Sruthi Shankar, additional reporting by Aaron Saldanha in Bengaluru Editing by Marguerita Choy)

((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6749 6328; Reuters Messaging: sruthi.shankar.reuters.com@reuters.net))

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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