Brazil's real rises on rate hike prospects; Latam stocks rally



By Susan Mathew

July 26 (Reuters) - A weakening dollar helped an index of emerging markets cut a chunk of its losses on Monday, with Brazil's real leading gains among some Latin American currencies on the possibility of rising interest rates there.

Stocks in the region .MILA00000PUS also rallied, outperforming peers elsewhere .MSCIEF that took a hit over tighter government rules in China.

MSCI's index of EM currencies .MIEM00000CUS fell up to 0.26% on the risk-off mood, but as the dollar weakened ahead of the Federal Reserve's policy decision on Wednesday, EM currencies found footing, with South Africa's rand ZAR= moving away from March lows, while Russia's rouble RUB= erased all of its losses.

Brazil's real BRBY reversed early losses, rising 0.6%. A survey on Monday showed consumer confidence in Brazil rose in July to a nine-month high, a fourth consecutive increase.

Meanwhile, a central bank survey showed Brazilian interest rates are expected to hit 7.00% this year as inflation rises. The benchmark Selic rate is currently at 4.25%.

These positive headlines helped investors look past continued protests to impeach President Jair Bolsonaro who faces reelection next year. Increasing political uncertainty has seen the currency fall about 3% from the 2021 highs hit last month.

"Although the government is already taking measures to improve its popularity/relationship with Congress, it would be important to monitor the impact of these demonstrations on the next polls," strategists at Citi said.

Mexico's peso MXN= rose 0.1% as oil prices improved, but rising coronavirus cases kept a lid on gains. The total number of infections approached 3 million, with hospital occupancies in Mexico City and its suburbs increasing by a third.

Investors are worried about renewed global economic fallout from a new wave of the pandemic.

The United States will not lift any existing travel restrictions "at this point" due to concerns over the highly transmissible COVID-19 Delta variant and the rising number of U.S. coronavirus cases, a White House official told Reuters.

Rising copper prices buoyed exporter Peru's sol PEN= , but Chile's peso CLP= extended losses to a third straight session, hitting eight-month lows as the focus slowly turns to general elections in November.

Miners were among the biggest gainers across Latam bourses on Monday as copper and iron ore prices rose. Mexico's IPC index extended gains to a fifth straight session.

Key Latin American stock indexes and currencies at 1420 GMT: Stock indexes

Latest

Daily %

change MSCI Emerging Markets

1284.02

-2.08 .MSCIEF

MSCI LatAm

2547.92

0.48 .MILA00000PUS

Brazil Bovespa

125899.35

0.68 .BVSP

Mexico IPC

50458.27

0.38 .MXX

Chile IPSA

4200.43

0.31 .SPIPSA

Argentina MerVal

-

- .MERV

Colombia COLCAP

1257.96

0.3 .COLCAP

Currencies

Latest

Daily %

change Brazil real

5.1777

0.61 BRBY

Mexico peso

20.0230

0.09 MXN=D2

Chile peso

764.5

-0.48 CLP=CL

Colombia peso COP=

3898.5

-0.35

Peru sol

3.913

0.31 PEN=PE

Argentina peso

96.5200

-0.08 (interbank) ARS=RASL


Reporting by Susan Mathew in Bengaluru Editing by Paul Simao

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