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EMERGING MARKETS-Latam FX gains as Fed calms tapering fears; set for weekly loss

·3 min read
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* Peruvian sol top weekly performer; Chile's peso top loser * MSCI FX index snap six-week winning streak * Mexican, Chilean, Peruvian c.banks leave rates unchanged By Shashank Nayar May 14 (Reuters) - Most Latin American currencies gained on Friday as the dollar calmed and Treasury yields fell after Federal Reserve officials eased fears about monetary tightening, while the Peruvian sol headed for its best week in two decades. MSCI's index of Latin American currencies gained 0.3% but was set to snap a six-week winning streak, while stocks rose 1.5%, also set to drop for the week. Major emerging market assets came under pressure earlier in the week after data showed U.S. inflation in April gained the most in nearly 12 years, stirring worries about tighter monetary policy. However, inflationary concerns eased after Federal Reserve Governor Christopher Waller said on Thursday the central bank would not raise rates until it sees inflation above target for a long time, or excessively high inflation. "There will be data disappointments along the way as the economy comes off the initial burst of fiscal support," said Mazen Issa, senior FX strategist at TD Securities. "This is not a cause for major concern but as this week's U.S. CPI report suggested, the market sometimes unnecessarily panics even if the factors driving it are known to be transitory," added Issa. The currency of Latin America's largest economy, Brazil , was up 0.9% on a weaker dollar, but falling iron-ore prices, the country's top export, inflicted record weekly losses of nearly 0.4% on the real. However, the real received support this week after major big international banks raised their forecasts for Brazilian economic growth this year, after economic activity for March suggested the economy expanded in the first quarter. Most other Latin American currencies including the Mexican peso and Chilean peso gained, while the Peruvian sol slipped after each of their respective central banks left benchmark interest rates unchanged to help support economies battered by the coronavirus pandemic. The monetary policy committee of Chile's central bank voted unanimously on Thursday to keep its benchmark interest rate unchanged at 0.5%, while Peru's central bank maintained interest rates at 0.25%. Mexico's peso gained 1% and was set to gain for the second consecutive week as oil prices jumped and recorded a third straight week of gains. Colombia's peso gained 1.1%, also supported by the surge in crude prices, and was set to record its best week since the beginning of this year even as social protests rise against a withdrawn government tax bill. The Peruvian sol was poised to be the best performing currency this week, while the currency of the world's top copper producer Chile looked like the top weekly loser as copper prices were on course for their first weekly decline since the start of April, driven by a dip in demand from China. The dollar index dropped 0.5% while Treasury yields slid four basis points to 1.628%. Key Latin American stock indexes and currencies: Stock Latest Daily indexes % change MSCI 1306.8 1.08 Emerging Markets MSCI LatA 2498.3 1.48 m 7 <.MILA000 00PUS> Brazil 121845 0.94 Bovespa Mexico 49320. 1.01 IPC 8 Chile 4506.9 1.42 IPSA 3 Argentina 52625. 0 MerVal 9 Colombia 1276.8 1.15 COLCAP 3 Currencie Latest Daily s % change Brazil 5.2671 0.79 real Mexico 19.845 0.4 peso Chile 703.7 0.52 peso Colombia 3676.4 1.13 peso 8 Peru sol 3.6687 -0.3 Argentina 94.04 -0.02 peso (interban k) (Reporting by Shashank Nayar in Bengaluru Editing by Mark Heinrich)