EMERGING MARKETS-Real up as Brazil, U.S. reinforce trade ties; China data lifts mood
By Shreyashi Sanyal
Oct 19 (Reuters) - The Brazilian real gained on Monday after the United States and Brazil agreed on steps to facilitate trade and investment in Latin America's biggest economy, while other currencies in the region were lifted by encouraging data from China.
The real BRBY, BRL= firmed 1% after Brazilian President Jair Bolsonaro announced, at a virtual summit organized by the U.S. Chamber of Commerce, the three agreements to ensure good business practices and to stop corruption.
Brazil's economy minister, Paulo Guedes, said the economy will shrink by 4% this year, less than the government's official forecast of a 4.7% decline, reiterating that this year's emergency public spending will not morph into "inexcusable" permanent spending in coming years.
The news soothed some worries about the Brazilian government's ability to fund a new fiscal program without overshooting its spending cap.
"There is room for fiscal risk premia to compress in BRL, though the risk is high that the rally runs out of steam as 2021 progresses, given the large fiscal drag hitting growth hard," emerging markets FX strategists at J.P. Morgan wrote in a note.
Most major currencies in the region traded higher, with the pesos of Chile CLP=, Mexico MXN= and Colombia COP= rising between 0.3% and 1%, as data from China showed the country's economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution.
China's gross domestic product (GDP) grew 4.9% in July-September from a year earlier, slower than the 5.2% forecast by analysts in a Reuters poll but faster than second quarter's 3.2% growth. The country remains the biggest importer of Latin American agricultural and metal products.
"Market sentiment is lifted by solid economic data out of China. While the GDP numbers for the third quarter missed expectations, industrial production and retail sales figures are still pointing to a healthy recovery," said Milan Cutkovic, Market Analyst at Axi.
Bond market brokers marked up prices on some of Venezuela's battered debt more than four-fold after a U.S. judge dealt a major blow to opposition leader Juan Guaido's efforts to have the bonds at the center of the dispute declared invalid.
The bonds belong to Venezuelan state oil company Petroleos de Venezuela (PDVSA), backed by half of the shares of the parent company of the firm's U.S. refining arm, Citgo Petroleum, and have been languishing at just over 10% of their face value after severe U.S. sanctions on Venezuelan debt. 
Bolivia's socialist candidate, Luis Arce, looks set to win that country's presidential election without need of a run-off, an unofficial count indicated, putting the left-wing party of Evo Morales on the brink of a return to power.
Key Latin American stock indexes and currencies:
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
Argentina peso (parallel) ARSB=
(Reporting by Shreyashi Sanyal in Bengaluru Editing by Matthew Lewis)
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