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EMERGING MARKETS-Latam FX firms, Brazil's real stars on c.bank chief's comments

Aaron Saldanha

comments@ (Recasts throughout, updates prices, adds market strategist's quote) May 29 (Reuters) - Latin American currencies firmed against the dollar on Wednesday, led by gains in Brazil's real, while a Latin American stocks benchmark hit a more than two-and-a-half-week high, aided by strong gains in Mexico. While strength among most regional currencies was modest, Brazil's real was the day's outlier as the central bank's president unveiled a slew of proposals to simplify regulations and make financial markets more accessible. MSCI's index of Latin American currencies gained 0.8%, while its Latin American stocks index rose 1.1% on the back of gains among equities in Mexico, whose shares have the second highest weighting in the index. The real firmed 1.1% in its best performance in more than a week. The president of the Brazilian central bank, Roberto Campos Neto, said the country aims to make the currency fully convertible within two to three years, in an effort to lower the cost of cross-border trade and investment. The monetary authority will propose changes to exchange rate legislation in the near future, he said, adding there was work to be done to reduce the cost of capital and tighten credit spreads. Yields on Brazilian local 10-year bonds fell as much as 18 basis points to 8.46%, their lowest level in at least 12 years, according to Refinitiv Eikon data, before rising slightly. The yield spread - or surplus yield - between Brazilian local 10-year bonds over their U.S. peers hit its lowest https://tmsnrt.rs/2I4V0Gt level in more than two months during the session. "Local bond markets are doing okay, growth is not firing on all cylinders anywhere in the world, as a result, it's good for nominal bonds," said Antoine Lesne, EMEA head of SPDR ETF research and strategy. Brazil posted a primary budget surplus of 6.54 billion reais ($1.64 billion) in April, the Treasury said, lower than expected and less than the same month last year due to a widening social security deficit. The Bovespa fell 0.2%, weighed on by losses among consumer staples, materials and energy stocks. Common shares and preferred shares of state-run oil firm Petroleo Brasileiro SA (Petrobras) fell 0.9% and 1%, respectively, hurt by a 1.1% decline in Brent crude futures. Miner Vale SA fell 1.4%, with Dalian-traded iron ore futures having slid earlier in the global day as transaction fees for some futures contracts were raised. Mexican stocks rose 1%, largely on gains among consumer staples and materials, while the peso strengthened 0.2%. Shares of telecommunications giant America Movil SAB de CV were set for their first daily gain this week, trading up 2.2%. Argentina's equities declined 2.6%, under pressure from energy stocks and financials, while the country's peso firmed about 0.5%.

Latin American stock indexes and currencies at 1913 GMT

Stock indexes daily

%

Latest changeMSCI Emerging Markets 985.58 -0.26MSCI LatAm 2645.69 1.07Brazil Bovespa 96192.46 -0.21Mexico IPC 42614.06 0.96Chile IPSA 4863.28 1.35Argentina MerVal 33761.86 -2.55Colombia IGBC 12034.67 1.32Currencies daily

% change Latest

Brazil real 3.9788 1.12Mexico peso 19.1520 0.21Chile peso 704.8 0.31Colombia peso 3350.3 0.73Peru sol 3.355 -0.06Argentina peso (interbank) 44.4200 0.61

($1 = 3.9768 reais)

(Reporting by Aaron Saldanha in Bengaluru Editing by Leslie Adler)