Latam FX, stocks edge up as investors hold on to Fed rate cut bets

EMERGING MARKETS-Latam FX, stocks edge up as investors hold on to Fed rate cut bets

By Amruta Khandekar

Feb 9 (Reuters) –Most major Latin American currencies and stocks edged higher on Friday as revised U.S. inflation data did little to alter bets on an interest rate cut later this year, while an uptick in oil prices gave an additional lift.

MSCI’s index for Latin American currencies .MILA00000CUS had inched up 0.2% by 1530 GMT. The dollar =USD softened after data showing U.S. monthly consumer prices rose less than initially estimated in December kept alive bets for a rate cut from the Federal Reserve in the first half of the year.

The Brazilian real BRL= led gains among peers, rising 0.6% against the dollar. Data showed the Brazilian services sector grew less than expected in December.

The Mexican peso MXN= firmed 0.3%, putting it on course for modest weekly gains, while the Colombian peso COP= gained 0.5%. Currencies of both the oil exporters were also boosted by gains in crude prices amid tensions in the Middle East. O/R

The Latam currencies index was largely flat on the week, pressured by uncertainty around the Fed’s monetary path after robust U.S. economic data. Meanwhile, many Latam economies such as Brazil and Chile have started cutting rates.

“Taken at first glance, last week’s blockbuster U.S. employment report is a resounding USD positive,” BofA Securities strategists said. They noted EM carry trades – where investors look to profit from the interest rate differentials between two currencies – were making a partial comeback.

“Ultimately, the market’s belief that the Fed will still deliver rate cuts this year is conducive to a risk-on carry environment,” they said.

Chile’s peso CLP= fell 0.6%, with the currency of the world’s top copper producer pressured by lower prices for the metal. MET/L

A gauge of Latam stocks .MILA00000PUS edged up 0.2%. Argentinian stocks .MERV outperformed with gains of 1.6%.

The Peruvian sol PEN=PE also weakened to 3.8703 per dollar after the central bank on Thursday cut its benchmark interest rate by 25 basis points to 6.25% as inflation continued to ease.

Investors also watched developments in Pakistan, where former Prime Minister Nawaz Sharif on Friday claimed victory in national elections. Assets in the country were under pressure, with stock markets .KSE in the red and sovereign dollar bonds taking a hit.

Elsewhere, Nigeria’s naira dropped to a record low of 1,540 against the dollar on the official market, LSEG data showed on Friday, after the currency was devalued last week.

Key Latin American stock indexes and currencies at 1530 GMT:

Stock indexes	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	995.11	-0.24
MSCI LatAm .MILA00000PUS	2539.36	0.17
Brazil Bovespa .BVSP	127975.44	-0.19
Mexico IPC .MXX	57619.48	-0.25
Chile IPSA .SPIPSA	6011.17	0.17
Argentina MerVal .MERV	1134406.94	1.658
Colombia COLCAP .COLCAP	1262.67	0.12
Currencies	Latest	Daily % change
Brazil real BRBY	4.9632	0.60
Mexico peso MXN=D2	17.0786	0.36
Chile peso CLP=CL	970.6	-0.49
Colombia peso COP=	3920.18	0.51
Peru sol PEN=PE	3.8703	-0.27
Argentina peso (interbank) ARS=RASL	831.2000	-0.06
Argentina peso (parallel) ARSB=	1130	1.33

Reporting by Amruta Khandekar, editing by David Ljunggren