Latin American stocks extend recovery, Mexican peso snaps four-day losing streak
Updated at 1518 GMT
Romania central bank cuts rates by 25 bps, leu steady
MSCI EM stocks index on track for second day of gains
Mexico, Peru policy decision due on Thursday
Latam stocks up 1.5%, FX up 0.9%
By Lisa Pauline Mattackal
Aug 7 (Reuters) -Stocks across Latin America rose on Wednesday, tracking global shares higher as markets clawed back losses from a brutal sell-off at the start of the week, while Mexico's peso jumped ahead of key data and a monetary policy decision.
Stocks in Brazil .BVSP, Mexico .MXX and Argentina .MERV rose between 0.4% and 0.7%, while MSCI's index of regional stocks .MILA00000PUS was up 1.5%.
Meanwhile, Mexico's peso MXN= soared 2.1%, recovering from a near two-year low touched on Monday after comments from the Bank of Japan's deputy governor induced a sharp fall in the yen JPY=EBS.
As a key beneficiary of yen-funded carry trades, where investors borrowed cheaply in the Japanese currency to invest in higher-yielding ones, Mexico's currency was one of the worst hit as yen gains saw many of those trades unwind. Despite the day's gains, the peso remains around lows last seen in March 2023.
"The good news for Mexico is we expect the U.S. Federal Reserve to cut rates in September, easing pressure on the currency, but as a bellwether for emerging market currencies any bad news in terms of a risk-off environment will hurt it," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.
Brazil's real BRL= also rebounded nearly 1% to a two-week high against the dollar. An index of Latin American currencies rose .MILA00000CUS nearly 1%.
Interest rate decisions are due Thursday from both Mexico and Peru, with Mexican inflation data also due.
Central banks in both countries are seen holding rates, but it remains to be seen how policymakers will assess the path forward in light of the recent volatility sparked by worries about slowing growth in the U.S. and China.
"The market has stabilized a little, so that will probably allow some central banks to continue with the normalization process of monetary policy," Abadia said.
Emerging market bourses gained broadly, with Hungary's main stock index .BUX up 1.8% in its best day in over two months.
Romania's leu EURRON= remained little changed against the euro EUR= after the central bank cut benchmark interest rates by 25 basis points, as expected by analysts polled by Reuters.
Turkey's lira TRY= rose for the first time in three sessions against the dollar, while Israel's shekel ILS= snapped a seven-day losing streak.
Meanwhile, prices of El Salvador's sovereign bonds rose after the International Monetary Fund said talks on a fund-supported program had made progress. The 2034 maturity rose over 2 cents to 71.44 cents on the dollar, according to LSEG data.
Markets in Colombia were closed for a public holiday.
HIGHLIGHTS
** GRAPHIC-Colombia's Petro struggles mid-term with slow economy and stalled reforms
** Johannesburg Stock Exchange's half-year profit slips on lower equity trading
** Fund managers to lengthen FX hedges on elections, volatility concerns, survey says
Key Latin American stock indexes and currencies
MSCI Emerging Markets .MSCIEF | 1051.26 | 1.98 |
MSCI LatAm .MILA00000PUS | 2167.13 | 1.52 |
Brazil Bovespa .BVSP | 126861.02 | 0.47 |
Mexico IPC .MXX | 52632.15 | 0.44 |
Chile IPSA .SPIPSA | 6218.85 | 0.65 |
Argentina Merval .MERV | 1467782.03 | 0.701 |
Colombia COLCAP .COLCAP | 1296.79 | 0.17 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.607 | 0.98 |
Mexico peso MXN= | 19.146 | 2.14 |
Chile peso CLP= | 943.4 | 0.05 |
Colombia peso COP= | 4135.5 | 0.07 |
Peru sol PEN= | 3.7359 | -0.79 |
Argentina peso (interbank) ARS=RASL | 936 | 0 |
Argentina peso (parallel) ARSB= | 1355 | 1.47601476 |
Reporting by Lisa Mattackal in Bengaluru; Editing by Andrew Cawthorne
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