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EMERGING MARKETS-Brazil's real leads Latam FX gains; stocks rally

Ambar Warrick and Sruthi Shankar
·3 min read

* Real adds 0.9% * Mexican, Colombian pesos gain on higher oil prices * Mexican economy to benefit from U.S. reopening- Analyst (Adds details, updates prices) By Ambar Warrick and Sruthi Shankar Nov 24 (Reuters) - Brazil's real led gains across Latin American currencies on Tuesday, while stocks rallied after U.S. President Donald Trump cleared the way for a smooth White House transition, adding to recent market optimism about the prospect of COVID-19 vaccines. The real added about 0.9% to the dollar as increased October tax revenues painted an encouraging picture of economic recovery. But the currency has widely underperformed its regional peers this year, due to record-low interest rates, rising coronavirus cases and concerns over surging government debt. Treasury Secretary Bruno Funchal said the government was taking on large quantities of debt, leaving virtually no room to increase fiscal spending. The South American country also has the world's third worst outbreak of the virus, behind only the United States and India. Data showed Brazil's annual rate of inflation accelerated to 4.2% in mid-November, above the central bank's year-end target, lending weight to the recent raising of average interest rate forecasts by economists. Sao Paulo shares jumped to a near nine-month high, while the wider Latin American equities index rose more than 2%, tracking gains on Wall Street. A spike in oil prices spurred gains in the currencies of crude exporters Mexico and Colombia. The Mexican peso rose 0.5% to hold near its strongest levels since early March. The currency has been among the biggest beneficiaries of easing U.S. political uncertainty and news on vaccine breakthroughs this month. "With Mexico’s dominant trading partner– the buyer of roughly 80% of Mexican exports– likely to vaccinate key segments of its population by mid-2021, a rebounding US economy should help to bolster Mexico’s outlook," analysts at TS Lombard wrote in a note. The Trump administration on Monday gave President-elect Joe Biden access to critical resources that will enable him to take the reins of power in January, ending weeks of political uncertainty in Washington and driving the safe-haven dollar down. Meanwhile, Peru said an eager market had soaked up its offer of $4 billion worth of debt, including a rare century bond as it scrambles to raise funds to soften the economic fallout from the coronavirus crisis. Argentine stocks surged more than 5% in catch-up trade, while data showed that economic activity in the country contracted lesser-than-expected in September. Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1225.32 0.39 MSCI LatAm 2228.32 2.47 Brazil Bovespa 109810.68 2.26 Mexico IPC 42874.95 1.44 Chile IPSA 4197.36 1.6 Argentina MerVal 54249.10 5.354 Colombia COLCAP 1271.20 1.86 Currencies Latest Daily % change Brazil real 5.3842 0.93 Mexico peso 20.0560 0.53 Chile peso 774 -0.13 Colombia peso 3634 0.32 Peru sol 3.609 -0.14 Argentina peso 80.6800 -0.40 (interbank) (Reporting by Ambar Warrick and Sruthi Shankar in Bengaluru; Editing by Kirsten Donovan and Grant McCool)