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REFILE-EMERGING MARKETS-Latam FX Gears Up For Best Week Of The Year As Real Nears Four-Month High

By on May 7, 2021 0
 (Corrects Reuters instrument code in paragraph 2)
    * Brazil's retail sales drops in March, far less than
expected
    * Mexican inflation jumps to highest since December 2017
    * U.S. jobs growth slows in April; Dollar falls

    By Shashank Nayar
    May 7 (Reuters) - Latin American currencies gained on Friday
and were set for large weekly gains as weak payrolls data pushed
the dollar to a more-than two-month low, while Brazil's real
jumped to a near four-month high after retail sales fell less
than expected. 
    MSCI's index of Latin American currencies
rose 0.9% to a near four-month high and was set for its best
week since November, while stocks firmed 1.5%.
    Brazil's real rose 0.7% after retail sales
volumes fell 0.6% in March from February, far less than the 7.0%
decline forecast by a Reuters poll of economists.
     The real was set for its best week this year after the
Brazilian central bank hiked rates on Wednesday, and flagged
more strong hikes to help curb rising inflation.
    "The BCB continues to see the rate hike cycle only as a
'partial normalisation' of interest rate levels but keeps the
door open for a revaluation at a later stage," said Alexandra
Bechtel, an analyst at Commerzbank in a note. 
    "We therefore stick to our rate view (Selic at 5.25% at
year-end 2021) even if the Brazilian central bank is likely to
be a little more courageous now than previously expected."
    Latam currencies were set for a sixth straight week of
gains, tracking a broader trend in emerging markets as improving
risk appetite saw traders favoring high-yield, risk-driven
assets. The risk-on sentiment has been underpinned by a weaker
dollar and Treasury yields.
    The dollar index fell 0.4% to a more-than two-month
low after payrolls data showed U.S. job growth unexpectedly
slowed in April. 
    The Mexican peso gained 0.7% and was set to end the
week higher, tracking a jump in oil prices. Annual inflation
picked up faster than expected in April to its highest level in
more than three years, moving well above the central bank's
target level, data showed.
    The currency of the world's top copper producer Chile
gained 0.7% as copper prices surged to record highs, while a
trade surplus of $2.040 billion in April further helped
sentiment.
    However, gains were limited as Chile's lower house of
Congress approved on Thursday an opposition-led bill that would
slap a progressive royalty on sales of copper as prices rise,
sharply hiking taxes on the sprawling industry to pay for social
programs during the COVID-19 pandemic.
    Among other Latin American currencies, the Colombian peso
 gained 0.8% but was the only Latin American currency set
to drop for the week along with the Argentine peso. 
    Key Latin American stock indexes and currencies:
 Stock indexes             Latest           Daily % change
 MSCI Emerging Markets             1350.21                  0.7
                                            
 MSCI LatAm                        2495.31                 1.49
                                            
 Brazil Bovespa                  120906.78                 0.82
 Mexico IPC                       49351.37                 0.85
 Chile IPSA                        4654.52                 0.51
 Argentina MerVal          -                -
 Colombia COLCAP                   1270.29                 0.29 Currencies                Latest           Daily % change
 Brazil real                        5.2374                 0.73
 Mexico peso                        19.914                 0.72
 Chile peso                          694.9                 0.69
 Colombia peso                     3770.65                 0.81
 Peru sol                            3.816                    0
 Argentina peso                      93.83                -0.03
 (interbank)                                
 
 (Reporting by Shashank Nayar in Bengaluru)