Peru's sol sinks as socialist presidency looks likely; Petrobras rallies



* Citi downgrades Peru to "market weight"

* Window for a recovery Colombian peso fading - JPM

* New Petrobras CEO seeks to maintain previous pricing policy

* Braskem jumps on M&A speculation

* EM assets set for lift after choppy start to 2021 - Blackrock (Updates prices)

By Susan Mathew

April 19 (Reuters) - Peru's sol posted its worst session in five months on Monday after the first poll ahead of a June presidential run-off election indicated a socialist win, while most other Latin American currencies rallied as the dollar declined sharply.

The sol PEN= lost 1% after Sunday poll from Ipsos Peru showed Pedro Castillo, the surprise winner of the first round vote earlier this month, in pole position to win the presidency in June, showing him with 42% support against 31% for right-wing rival Keiko Fujimori.

"Fujimori's path to bridge the gap will not be easy due to her high rejection rate. We believe this opens the space for further negative repricing in Peruvian assets," said strategists at Citi Research.

"We move Peru back to market weight."

Colombia's peso COP= fell after three straight days of gains. Ratings agency Fitch on Monday said Colombia's $6.4 billion tax reform, sent to Congress last week, is key for the country's bonds to retain investment grade.

"Our concern is that the window for a COP recovery is fading as the debate domestically switches to fiscal reform, amid investor concerns over the country's twin deficits," analysts at JPMorgan said in a note.

"If anything, risks are skewed toward the reform being watered down over the coming month, which will present another headwind for COP outperformance."

As the greenback .DXY decline against most rivals, Brazil's real BRBY BRL= gained for a fifth straight session - its longest winning streak in almost a year, while Mexico's peso MXN= notched three-month highs.

Data on Monday showed Mexico's economy shrank by more than 2% in March, but analysts expect a rebound in subsequent months.

As copper scaled decade highs, top producer Chile's peso CLP= tacked on 0.4%. Rising copper prices have made Chile's currency one the best performing Latam units so far this year, up 1.6% compared to a 6.4% drop for Brazil's real.

The BlackRock Investment Institute said on Monday the economic restart, stabilising U.S. Treasury yields and relatively cheap valuations will boost EM assets after a choppy start to 2021.

With Wall Street's main indexes declining, most Latam bourses fell with Brazil's Bovespa stocks index .BVSP breaking a five-day winning streak.

But oil major Petrobras PETR4.SA jumped 6% after its new chief executive said he sought to maintain policies of the previous administration, including pricing policy, which generally won market plaudits.

Brazilian petrochemical producer Braskem BRKM5.SA rallied 4.7% on speculation of a potential sale of the company.

Key Latin American stock indexes and currencies: Stock indexes

Latest Daily %

change MSCI Emerging Markets

1349.04

0.03 .MSCIEF

MSCI LatAm

2410.11

0.21 .MILA00000PUS

Brazil Bovespa

120863.38

-0.21 .BVSP

Mexico IPC

48152.41

-1.18 .MXX

Chile IPSA

4985.67

-0.05 .SPIPSA

Argentina MerVal

47955.24

0.61 .MERV

Colombia COLCAP

1311.36

-0.43 .COLCAP

Currencies

Latest Daily %

change Brazil real

5.5554

0.53 BRBY

Mexico peso

19.8387

0.38 MXN=D2

Chile peso

699.4

0.64 CLP=CL

Colombia peso COP=

3625

-0.64

Peru sol

3.6718

-1.06 PEN=PE

Argentina peso

92.9200

-0.12 (interbank)

ARS=RASL


Reporting by Susan Mathew and Ambar Warrick in Bengaluru; editing by Jonathan Oatis and Alistair Bell

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