Friday, December 3

Currencies firm after US jobs data; Brazilian real leads


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Emerging market currencies firmed on

Friday, with Brazil’s real jumping more than 1%, after strong

US job numbers and positive reports on an experimental Pfizer

COVID-19 pill increased optimism about the global economic

recovery.

Most currencies hit session highs, with those of Russia

and South Africa erasing session losses of over

0.6% after data showed US nonfarm payrolls rose by 531,000

jobs last month, compared with estimates for 450,000.

The unemployment rate fell to 4.6% from 4.8% in September.

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Most Latin American currencies also firmed, with Mexico’s

peso rising 1%, putting MSCI’s index of EM currencies

on track to cut almost all its losses this week.

Pfizer Inc’s experimental antiviral pill for

COVID-19 was shown to cut by 89% the chances of hospitalization

or death for adults at risk of developing severe disease. This

propped up travel and tourism-related stocks globally.

Riskier currencies thrive on US rates staying low as they

benefit from the interest rate differential that increases their

appeal for so-called carry trade, in which investors borrow in a

low-yielding currency to invest in higher-yielding assets.

Brazil’s real led gains in Latin America and was on

course to end the week almost 2.2% higher. But in Brazil the

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outlook for financial markets looks bleak, Capital Economics

said in a note to clients.

“We don’t think a rebound in Brazil’s financial markets is

imminent, as we doubt the headwinds facing them are likely to go

away any time soon,” they said.

These included monetary policy being tightened at the risk

of economic growth, slowing economic growth in export

destination China, and mounting political and fiscal concerns,

they added.

Brazil also recently opened the door to a one-off breach of

a constitutional spending cap to pay for a bigger welfare

program proposed by President Jair Bolsonaro.

But analysts at Credit Suisse said the nearly 100 billion

reais in budget funds to be freed up are essential for the

government to be able to create the Auxilio Brasil — the social

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program that will replace the Bolsa-Familia.

“If rejected, the government can extend the emergency aid

paid to 39 million people since the beginning of the pandemic,

using extraordinary credit,” they said.

Sao Paulo-listed stocks gained 1.3% to rise from

one-year lows hit last session. Banco Bradesco was

the top gainer, up 5% after raising its outlook for lending and

fees after its quarterly profits topped estimates.

In Argentina, the central bank said it had ordered local

financial institutions not to increase the amount of reserves

held in foreign currencies this month, amid foreign exchange

rate uncertainty ahead of Nov. 14 congressional elections.

Peru’s sol rose from three-week lows after Congress

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on Thursday confirmed a new moderate left Cabinet, while

Colombia’s peso hit lows not seen since August despite an

upgrade to its economic growth forecast by the finance ministry.

Key Latin American stock indexes and currencies at 1915 GMT:

Stock indexes Latest Daily%

change

MSCI Emerging Markets 1265.39 -0.24

MSCI LatAm 2159.27 1.59

Brazil Bovespa 104785.82 1.33

Mexico IPC 52017.84 0.28

Chile IPSA 4387.36 -1.92

Argentina MerVal 92406.17 1.258

Colombia COLCAP 1387.57 -0.33

Currencies Latest Daily%

change

Brazil real 5.5166 1.65

Mexico peso 20.3288 1.03

Chile peso 811.8 0.27

Colombia peso 3870.03 -0.01

Peru sol 3.9996 0.09

Argentina peso (interbank) 99.9400 0.03

Argentina peso (parallel) 196 1.53

(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;

Editing by Steve Orlofsky and Jan Harvey)

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