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EMERGING MARKETS-Chilean, Colombian FX supported by strong commodity prices

Susan Mathew and Ambar Warrick
·3 min read
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* Chilean, Colombian pesos hit highest since late Jan. * Oil prices hit 13-month high, copper prices at 8-year peak * Mexico's peso slips; MXN not cheap any more -JPM (Adds details, updates prices) By Susan Mathew and Ambar Warrick Feb 15 (Reuters) - The Chilean and Colombian currencies werenear one-month highs on Monday as copper and oil prices gainedon bets that a global economic recovery this year would bolsterdemand for commodities. Copper prices jumped to their highest since 2012 asinvestors continued their buying spree on concerns over risinginflation and stronger-than-expected demand in top metalsconsumer China. The currency of the world's top producer of the red metal rose 0.4% against a weaker dollar, after logging its bestweek since December. A central bank poll of traders also said Chile's benchmarkinterest rate is expected to creep slightly higher in the next12 months, implying some optimism over economic conditions. Colombia's peso rose 0.2%, bolstered by oil priceshitting a 13-month high as vaccine roll-outs spurred hopes ofstrong demand in a post-coronavirus world. Colombia's first COVID-19 vaccines - 50,000 from Pfizer -will arrive in the Andean country on Monday afternoon, PresidentIvan Duque said. The government plans to administer its firstdose on Saturday. But data showed the Colombian economy shrank 6.8% in 2020,due to the pandemic. Hopes of more stimulus in the United States and the rolloutof COVID-19 vaccines across the globe have bolsteredexpectations for a steady economic recovery this year andspurred buying of risk-driven assets. Still, Latam assets have lagged their broader peers due toconcerns over fiscal health in the region, as well as delays invaccine programs. Emerging market stocks hit a record high on thereflation trade optimism, while Latam stocks have yet to reachpre-COVID-19 levels. Mexico's peso slipped 0.1% as COVID-19 infections anddeaths continued to mount in the country. The total number ofcases rose to nearly 2 million as of Sunday, while deaths wereat 174,207. But the health ministry said real number of casesand deaths is likely to be significantly higher than theofficial count. "In short-term models, the currency has now moved back tofair value from being cheap, reducing the risk reward for largeMXN "over-weight" positions, said strategists at JP Morgan. While they think the Mexican peso may benefit from aconstructive environment for emerging market currencies for alittle while, they point to reviews by rating agencies due inthe second quarter, potentially reminding investors about issuesaround indebted state oil firm Pemex, business confidence andoil investment. With markets in Brazil, Argentina as well as the UnitedStates closed for local holidays, volumes were thin. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1437.50 0.6 MSCI LatAm 2419.41 0.1 Mexico IPC 44223.73 0.05 Chile IPSA 4619.05 0.43 Colombia COLCAP 1368.02 0.15 Currencies Latest Daily % change Mexico peso 19.9504 -0.10 Chile peso 718.8 0.43 Colombia peso 3489 0.16 Peru sol 3.6437 0.00 (Reporting by Susan Mathew in Bengaluru; Editing by FranklinPaul and Dan Grebler)