Home Argentina market EMERGING MARKETS – Currencies rebound as dollar falls, stocks head for weekly losses

EMERGING MARKETS – Currencies rebound as dollar falls, stocks head for weekly losses



    * EM stocks index headed for 1.2% weekly declines
    * Chilean peso firms as economic activity jumps 
    * Venezuela to subtract six zeros from currency

 (Adds details, updates prices throughout)
    By Shreyashi Sanyal
    Oct 1 (Reuters) - Emerging market currencies firmed against
the dollar on Friday, with Brazil's real, the Mexican peso and
South Africa's rand leading gains, while stocks marked a dour
start to the fourth quarter on slowing growth and rising
inflation worries. 
    Investor-favourite carry trade currencies like the real
, peso and rand rose about 1.4% each,
as the dollar fell for the second day, tracking declines in U.S.
Treasury yields, as investors booked profits after recent sharp
    A carry trade is when investors borrow in a low-yielding
currency to invest in higher-yielding assets, which has often
helped these currencies stay afloat and outperform regional
peers this year.
    Still, many emerging market currencies ended the week with
declines including those of Mexico and Brazil, while the rand
tracked nominal gains for the week.     
    Chile's peso found support from a bounce in prices of
its main export, copper, to rise 1.2% off 15-month lows. The
currency slipped 10% last quarter and about 1.3% this week. 
    Data showed Chile's economic activity jumped
19.1% in August versus the same period the previous year.

    The MSCI's emerging market stocks index fell 0.4%,
declining for the third time this week as data showed weakening
manufacturing activity across Asia and Russia in September, due
to curbs to contain the latest wave of the coronavirus pandemic,
as well as indications of slowing growth in China.
    The index is set for a weekly decline of 1.3%, while its
Latin American counterpart also fell by the same
amount for the week. 
    However, analysts are positive on emerging market equities
based on current valuations. 
    "They (EM stocks) trade at a discount to the developed world
despite strong growth potential and headroom for credit
consumption," strategists at Franklin Templeton wrote in a
client note.
    "Latin America is rich in natural resources and looks to
benefit from the commodity boom taking place amid the recovery
from the pandemic."
    In other parts of Latin America, Venezuela will launch its
second monetary overhaul in three years by cutting six zeros
from the bolivar in response to hyperinflation, simplifying
accounting but doing little to ease the South American nation's
economic crisis.
    The International Monetary Fund said on Thursday that its
board had approved an agreement with Ecuador to revise the terms
of a financing deal reached last year, and would immediately
disburse some $800 million to the South American country.

    Key Latin American stock indexes and currencies at 1945 
        Stock indexes                  Latest    Daily %
 MSCI Emerging Markets                  1248.50     -0.37
 MSCI LatAm                             2266.58      1.72
 Brazil Bovespa                       112796.68      1.64
 Mexico IPC                            51021.57     -0.71
 Chile IPSA                             4326.72     -0.82
 Argentina MerVal                      77816.67     0.586
 Colombia COLCAP                        1369.18      0.53
            Currencies                 Latest    Daily %
 Brazil real                             5.3713      1.44
 Mexico peso                            20.4202      1.03
 Chile peso                               801.6      1.15
 Colombia peso                          3787.53      0.47
 Peru sol                                4.1242     -0.09
 Argentina peso (interbank)             98.7900     -0.04
 Argentina peso (parallel)                  183      1.64
 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Giles
Elgood and Ken Ferris)



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