EMERGING MARKETS-Latam FX fall as dollar rallies on dimmer hopes of aggressive U.S. rate cut

Susan Mathew

aggressive U.S. rate cut@ (Updates prices) July 5 (Reuters) - Most Latin American currencies slipped on Friday as the dollar was lifted by hopes that the U.S. Federal Reserve would not cut rates aggressively at its meeting this month. The dollar rally was spurred by investors trimming bets of a 50-basis-point cut in U.S interest rates in July after data showed that U.S. jobs growth in June beat expectations strongly to the upside. Regional currencies lost between 0.03% to 0.7%, with Brazil's real slipping from three-month highs hit last session, as the dollar climbed 0.5%. But, tepid wage growth in the United States over the same period kept alive bets of a quarter-basis-point cut. "It (jobs data) reduces the scope for a 50bp cut this month, though does little to alter the easing narrative linked to the Fed," strategists at TD Securities wrote in a note. Riskier assets such as those in emerging markets have been rising since last month on hopes of accommodative monetary policy by major central banks, and signs of progress in U.S.-China trade relations. Brazil's real fell 0.4% after a strong rally on Thursday spurred by the government's pension reform bill clearing a key congressional hurdle, which paved the way for it to be put to a lower house plenary vote before the parliament breaks for recess. On the week, the currency was on course for a 0.8% gain, reversing last week's decline. Mexico's peso was flat, and was set to clock weekly gains of around 1.2%. A 0.7% drop in Chile's peso led losses in the region on Friday, followed by the Colombian currency's 0.6% dip. Stocks in the region were mixed. Brazil shares rose 0.3% to hit fresh highs. Airline Gol Linhas Aereas Inteligentes topped the Bovespa index after reporting a 6.5% rise in demand for flights in June. Mexican shares dipped 0.1%, in line with U.S. stocks that declined after the jobs data. In Argentina, both stocks and the currency climbed. According to a preliminary draft of the government's upcoming budget proposal, inflation should end 2019 under 40.3% while the economy shrinks 0.8%. Latin America's No. 3 economy has been hammered by recession and inflation of more than 57 percent over the last 12 months. On Friday, the International Monetary Fund said it has completed its fourth review of the country and is set to disburse $5.4 billion to the government as per a standby credit deal.

Key Latin American stock indexes and currencies at 1930 GMT:

Stock indexes Latest Daily %


MSCI Emerging Markets 1059.33 -0.5MSCI LatAm 2911.75 -0.3Brazil Bovespa 103968.38 0.32Mexico IPC 43396.60 -0.14Chile IPSA 5057.13 0.04Argentina MerVal 41797.12 1.01Colombia IGBC 12834.52 0.71Currencies Latest Daily %


Brazil real 3.8165 -0.48Mexico peso 19.0129 -0.08Chile peso 683.36 -0.64Colombia peso 3207.18 -0.56Peru sol 3.29 0.03Argentina peso 41.7950 0.49


(Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis)