Retreating dollar lifts currencies, Brazil's real cheers GDP

(Reuters will not be publishing its EMEA-focused emerging market reports on Thursday and Friday on account of UK holidays. Coverage will be resumed on Monday, June 6.)

By Susan Mathew

June 2 (Reuters) - Most emerging market currencies firmed on Thursday as the dollar weakened, with the Chilean peso hitting over one-month highs, while Brazil's real cheered upward revisions in economic growth forecast for Latin America's largest economy.

As the dollar's major rival rallied, the greenback slid, leaving some breathing space for emerging market currencies. China's yuan CNY= firmed 0.2%, South Africa's rand ZAR= rose 0.3%, while Russia's offshore rouble RUB= firmed to 62.42 per dollar.

In Latam, Brazil's real BRBY BRL= firmed 0.2%, looking to make back some of Wednesday's 1.7% slide.

"Across the major advanced and emerging markets, Brazil has the highest real 10-year yield on sovereign debt," said Robin Brooks, chief economist at the Institute of International Finance, in a Twitter post on Thursday.

"That risk premium on Brazil is just too high and is why Brazilian assets will keep rallying."

But volatility in Brazil's real is set to increase in the near-term as October's presidential vote becomes the key focus, a Reuters poll of Latam currencies showed.

Data showed Brazil's economic growth accelerated slightly less than expected, growing 1% in the first quarter from the fourth quarter, but is seen gaining steam in the second half as an improving labor market boosts household spending.

Copper producer Chile's peso CLP= jumped almost 1%. Prices of the red metal rose as the lifting of COVID-19 restrictions in top metals consumer China buoyed hopes of demand recovery.

Chile is expected to hike its benchmark interest rate this month to 9% from 8.25%, a central bank poll showed.

Central bankers around the world are walking a tight rope as they try to manage surging inflation with tighter monetary policy while trying to keep economies from tipping into recession.

Hungary's central bank raised its one-week deposit rate by 30 basis points to 6.75% as expected on Thursday.

Developing world currencies will struggle to hold on to recent gains towards year-end as U.S. Federal Reserve interest rate hikes and inflation concerns keep the dollar in the forefront, according to a Reuters poll.

Among stocks, Brazil's Bovespa .BVSP rallied almost 1% to lead gains in Latin America, despite a slip on Wall Street.

In Mexico, state oil company Petroleos Mexicanos (Pemex) plans to launch a $2 billion-issue of global unsecured notes Thursday, due 2029, according to a source, which it would use the funds to pay bills to suppliers and contractors.

Pemex, has $109 billion in financial debt, according to its latest quarterly results. Default worries about Pemex have hit Mexico's sovereign credit rating in the past.

Key Latin American stock indexes and currencies at 1354 GMT: Stock indexes


Daily % change MSCI Emerging Markets








Brazil Bovespa


112248.89 0.8 Mexico IPC


51356.76 -0.29 Chile IPSA



0.12 Argentina MerVal



0 Colombia COLCAP






Daily % change Brazil real



0.19 Mexico peso



0.47 Chile peso



0.70 Colombia peso




Peru sol



0.00 Argentina peso (interbank)

120.4700 -0.12


Reporting by Susan Mathew in Bengaluru; Editing by Alistair Bell

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