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EMERGING MARKETS-Latam currencies rise, Argentine markets steady on capital controls

By Agamoni Ghosh

By Agamoni Ghosh Sept 4 (Reuters) - Latin American currencies rose on Wednesday, helped by a softer U.S. dollar and rising oil prices, while newly imposed capital controls in Argentina helped its markets steady even as anti-government protests gathered steam in Buenos Aires. MSCI's index of Latin American currencies came off their one-year lows to move 0,8% higher as weak manufacturing data in the U.S. put the greenback on the back foot. Brazil's real and Mexico's peso led gains, each up nearly 1%, getting an additional boost from higher oil prices. Chile's peso was only marginally higher, underperforming its regional peers after the central bank cut its key interest rate by 50bps on Tuesday as inflation levels continue to drag for the world's top copper exporter. Latin America's top currencies are, however, poised to remain weak in coming months as central banks in Brazil and Mexico keep easing to revive growth, with worries over Argentina's financial condition adding to a softer trend, a Reuters poll showed. Sao Paulo-traded stocks rose over 1%, boosted by Petrobras which rose nearly 3% after Brazil's Senate approved an amended transfer of rights agreement to settle a dispute over pre-salt oil fields. Indices in Mexico, Chile and Colombia , all gained between 0.4% and 0.8%. ARGENTINE TURMOIL Argentina's peso held steady, while the Merval index moved 2.4% higher as newly-imposed capital controls helped stabilize haywire markets, even as calls for anti-government protests gathered steam as the country faces a deepening financial crisis. Ratings agency Fitch, which had downgraded the country's sovereign credit ratings to RD (restricted-defaulted), upgraded it late-Tuesday to its former status CC (strong default probability). A divergence between the official and black market rates of the currency, however, remained casting doubts on how long the recovery in the peso could be sustained through such controls. "We expect to see further weakness in local assets as the market preempts the possibility of stricter capital controls," said analysts from Morgan Stanley in a note. The controls come after markets reacted sharply to sovereign debt downgrades by rating agencies after the government announced its plans to "re-profile" some $100 billion in debt. Key Latin American stock indexes and currencies at 1430 GMT Stock indexes daily % change Latest MSCI Emerging Markets 990.89 1.81 MSCI LatAm 2597.95 1.99 Brazil Bovespa 100842.41 1.17 Mexico IPC 42198.94 0.89 Chile IPSA 4755.35 0.89 Argentina MerVal 23649.69 2.41 Colombia IGBC 12676.46 0.28 Currencies daily % change Latest Brazil real 4.1142 1.58 Mexico peso 19.7991 0.88 Chile peso 722.8 0.37 Colombia peso 3403.35 0.80 Peru sol 3.3938 0.30 Argentina peso 55.6000 0.28 (interbank) (Reporting by Agamoni Ghosh in Bengaluru)