Latin American currencies, stocks edge higher ahead of US jobs data

* Mexican peso hits 20 per dollar for first time since Aug. 5 * Mexico’s bank regulator approves stock market overhaul * Markets still see chance of 50-basis-point Fed rate cut * Egypt’s central bank keeps rates on hold * Latin American FX index up 0.2%, stocks up 0.3% By Shashwat Chauhan and Lisa Pauline Mattackal Sept 5 – Most Latin American currencies climbed against a lackluster dollar on Thursday, as a mixed bag of U.S. economic data ahead of a key labor market report kept bets on a Federal Reserve interest rate cut this month intact. The dollar slipped after data showed U.S. private employers hired the fewest number of workers in 3-1/2 years in August, while separate data showed services sector activity was steady in August. MSCI’s index for Latin American currencies rose 0.2%, while a gauge for stocks gained 0.3%. Investors globally have been cautious this week on signs of slowing growth in U.S. economy, while some uncertainty remains over how much the Federal Reserve could ease policy at its Sept. 17-18 meeting. The release on Friday of the U.S. employment report for August could be key in gauging the size of the potential rate cuts ahead of inflation data later this month. Market bets still favor a 25-basis-point rate cut at the policy-setting Federal Open Market Committee’s meeting in two weeks, with a roughly 40% chance of a 50-basis-point move, according to CME Group’s FedWatch Tool. “A rate reduction at the FOMC’s upcoming meeting on September 18 looks all but certain, but the upcoming CPI report could serve as a tiebreaker between a 25- or 50-bp cut if the August jobs report lands in the gray zone between clearly weak and clearly strong,” Wells Fargo analysts wrote in a note. Lower U.S. interest rates typically benefit higher-yielding, but riskier emerging market assets and would help relieve pressure on weakening currencies in Latin America. Brazil’s real led gains in the region, adding 1.1% against the dollar in its best day in nearly two weeks. A Brazilian central bank official said policymakers have taken note of the country’s stronger economic growth and currency since their last policy meeting. Meanwhile, Mexico’s peso slipped 0.1% to 19.9431 after briefly touching the 20-per-dollar level for the first time in more than a month, as jitters persisted after the lower house of Congress approved an overhaul of the country’s judiciary early on Wednesday. Colombia’s peso appreciated 0.5%, while Chile’s peso was flat. A Reuters poll of FX strategists showed Brazil’s real will continue to be restrained by worries about the country’s fiscal situation in the near future, while most respondents saw risks for the Mexican peso tilted to the downside. Local stock exchanges were broadly higher, with Brazil’s Bovespa up 0.3%. Mexican stocks lost 0.2%. Mexico’s bank regulator approved the terms of a stock market reform that was passed last year, which could loosen regulations for companies to go public, speed up the process and reduce the costs involved. Ghana launched a restructuring agreement for roughly $13 billion of its international bonds. HIGHLIGHTS ** Codelco buys Enami’s 10% stake in Teck’s Quebrada Blanca mine ** Venezuela’s oil exports climb to four-year high in August ** Brazil’s auto production up, sales down in August ** Egypt’s central bank leaves interest rates on hold Key Latin American stock indexes and currencies: MSCI Emerging Markets 1077.07 0.32 MSCI LatAm 2232.9 0.26 Brazil Bovespa 136554.16 0.33 Mexico IPC 51709.15 -0.2 Chile IPSA 6360.26 -0.45 Argentina Merval 1767646.3 -1.629 6 Colombia COLC 1341.27 0.38 Brazil real 5.5754 1.14 Mexico peso 19.9426 -0.09 Chile peso 942.59 0.01 Colombia peso 4156 0.55 Peru sol 3.7755 -0.12 Argentina peso 953.5 0 Argentina peso 1245 4.8192771 08

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