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EMERGING MARKETS-Mexican peso rises as dollar wilts, to end year up 4%

Credit: REUTERS/JOSE LUIS GONZALEZ

Mexico's peso firmed in its last trading day for the year on Tuesday as increasing investor confidence about global growth prospects and significantly better U.S.-China trade relations sent the dollar to six-month lows on fading safe-haven buying.

There will be no Latin America-focused emerging market report on Jan. 1 owing to the New Year's Day holiday

Dec 31 (Reuters) - Mexico's peso firmed in its last trading day for the year on Tuesday as increasing investor confidence about global growth prospects and significantly better U.S.-China trade relations sent the dollar to six-month lows on fading safe-haven buying.

An index of the greenback against six major rivals .DXY was down 0.3%, putting the currency on track to log meager gains for the year. FRX/MKTS/GLOB

Mexico's peso MXN= rose 0.4% to 18.865 per dollar by 1630 GMT, while the benchmark IPC stock index .MXX fell 0.3%. Other major Latam stocks and currencies marked their last trading day of the decade on Monday.

In a tumultuous year for Mexican markets, the peso was set to end the year up around 4%, building on 2018's bare minimum gains, while stocks rose 4.5%, recovering from a 15% fall last year.

After starting on a positive note, investors turned nervous when a trade deal with United States and Canada that was salvaged in September 2018 was revisited to ensure its labor provisions could be enforced.

As amendments to the deal were under discussion, a second blow came when U.S. President Donald Trump vowed to impose tariffs on all goods from Mexico in response to a surge of illegal Central American immigrants across the southern border.

Mexican assets plunged on the possibility of yet another tariff war.

But tariffs were averted just days before they were to take effect after the United States and Mexico struck a deal, with Mexico agreeing to expand a controversial asylum program and deploy security forces to stem the flow of migrants.

Toward the beginning of the second half of the year, Mexico's central bank began an easing cycling in an attempt to boost the economy, which had slipped into a mild recession in the first half of the year.

The bank began cutting rates by 25 basis points in August - its first cut in five years, and implemented three more cuts that took the benchmark interest rate to 7.25% in December.

Data showing consumer prices slipping well below the central bank's target in early December signaled easing was likely to continue into 2020.

Officials from Canada, Mexico and the United States signed a fresh overhaul of their trade deal in December, aiming to improve enforcement of worker rights, which helped Mexican markets end the year on a high note.

(Reporting by Susan Mathew in Bengaluru; Editing by Dan Grebler)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130))

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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