EMERGING MARKETS – Latam currencies post first-in-five weekly gain as dollar retreats


* MSCI Latam shares ~6%, FX ~3.5% stronger on week * Chile vs. the bank was considering a 150 basis point rate hike at the May meeting; peso up 1% * Colombian leftist Petro holds the lead in the presidential race – poll * The ruble hits its highest level in seven years against the euro on capital controls By Anisha Sircar and Bansari Mayur Kamdar 20 May (Reuters) – Latin American stocks hit a three-week high on Friday after measures taken by China to revitalize its struggling economy boosted investor confidence, while a currency indicator headed for its first weekly gain in five as the dollar’s recovery faltered. China on Friday cut the five-year prime lending rate by 15 basis points to 4.45%, while its securities regulator announced measures to support virus-hit sectors via capital markets, allaying some fears about the impact of shutdowns and an economic downturn. Iron ore prices jumped 5.3% after a two-day decline, and copper prices rose on hopes of a recovery in demand. “The fact that China is stepping up is a major boost for any country in Latin America because their economies are going to be based on the idea that the globalized system is being overhauled,” said Juan Perez, director of the trading at Monex. The Colombian peso jumped 1.6%. Left-leaning presidential candidate Gustavo Petro, a former guerrilla fighter vowing to fight inequality, held a big lead ahead of the country’s May 29 vote, a poll showed, although center-right rival Federico Gutierrez saw a slight increased support. “If the polls go to the left-most candidate, there will be some risk aversion on the peso…there’s huge doubt about the kinds of reforms he would bring,” Perez said. The Brazilian real gained 1% to also hit a three-week high, while the Mexican and Chilean pesos are expected to register weekly gains. “Latin American countries are likely close to the end of their up cycles given their early start, so investors are biased on the OW duration (overweight) in countries like Brazil,” wrote Min Dai, strategist of Morgan Stanley, in a note. Chile’s central bank considered raising rates by as much as 150 basis points at its May meeting due to persistent inflation, central bank minutes show. The currency has risen more than 4% since the decision after hovering at lows not seen since December. The MSCI Latam Currency Index followed its first weekly gain in five as the dollar lost steam after its staggering 10% surge, while stocks rose 6% this week. Elsewhere, the Russian ruble hit its highest level in seven years against the euro, which analysts attribute to EU countries preparing to pay Russia for gas and capital controls imposed by Moscow. Meanwhile, Turkey’s central bank is expected to keep its key rate at 14% next week despite an expected further rise in inflation after hitting 70% last month, according to a Reuters poll. Key Latin American Stock Indices and Currencies at 1500 GMT: Stock Indices Latest Daily Change Centers MSCI Emerging Markets 1034.85 1.97 MSCI LATAM 2369.20 1.94 Brazil Bovepa 108481.24 1.38 Mexico IPC 51711.24 0.82 CHILE exchange Brazilian Real 4.8643 1.11 Mexican peso 19.8790 0.22 Chilean peso 832.9 0.48 Colombian peso 3994.85 1.32 Peruvian sol 3.725 0.24 Argentine peso 118.4900 -0.12 (interbank) Argentine peso 202 1, 98 (parallel)