May 4, 2018 / 3:45 PM / 22 days ago

EMERGING MARKETS-Argentine peso rebounds following dramatic rate hike

    SAO PAULO/BUENOS AIRES, May 4 (Reuters) - Argentina's peso
strengthened sharply on Friday, gaining over 5 percent against
the dollar after the central bank hiked the benchmark interest
rate to 40 percent in a dramatic bid to shore up the currency.
    On Thursday, the peso plunged 7.8 percent even as the
central bank hiked the rate by 300 basis points, its second
surprise hike in less than a week.
    After that move failed to calm markets, the bank boosted the
rate again on Friday by 675 basis points. The central bank has
hiked the benchmark rate some 1,275 basis points since April 27.

    That appeared to do the trick for now, as the peso
 traded up 5.5 percent at 21.8 pesos to the dollar in
the late morning.
    Still, traders say the peso's recovery remained fragile.
    "I think it is a good play by the government, trying to
amend for some mistakes in the past," said Gabriel Zelpo, chief
economist at Buenos Aires consultancy Elypsis. "However, even as
I am optimistic about the result, it must be followed by a calm
international scenario."
    Elsewhere in the region, currency and equities markets were
mixed as eyes were fixed on the ongoing tariff talks between the
United States and China.
    The Mexican peso was the biggest loser in the
region, falling 1 percent against the dollar after the U.S.
Labor Department reported job growth increased less than
expected in April and the unemployment rate dropped to a level
last seen in December 2000 as some jobless Americans left the
labor force. The report stoked bets of constrained monetary
policy.
    Brazil's benchmark Bovespa index, which ticked up
0.3 percent, was aided by Lojas Renner SA, the
country's largest apparel retailer. Its shares rose nearly 5
percent after reporting quarterly results that topped estimates.
    That accounted for about one-quarter of the index's rise on
Friday.
    In Colombia, both the peso currency and IGBC equities
index, which rose 0.58 percent and 0.6 percent,
respectively, benefited from solid oil prices, which rose on
Friday as the market awaits news from Washington on possible new
sanctions on Iran.
    
Key Latin American stock indexes and currencies at 1453 GMT:
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets         1135,17     -0,24     -1,78
                                                  
 MSCI LatAm                    2864,53      0,83      0,46
                                                  
 Brazil Bovespa               83398,97      0,13      9,16
                                                  
 Mexico IPC                   47004,01     -0,19     -4,76
                                                  
 Chile IPSA                    5646,01       0,1      1,46
                                                  
 Chile IGPA                   28441,97       0,1      1,65
                                                  
 Argentina MerVal             29784,55      0,95     -0,93
                                                  
 Colombia IGBC                12447,34      0,76      9,47
                                                  
 Venezuela IBC                21216,78     -3,46   1579,69
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3,5228      0,18     -5,95
                                                  
 Mexico peso                   19,1630     -0,55      2,80
                                                  
 Chile peso                     619,95     -0,30     -0,85
                                                  
 Colombia peso                 2841,21      0,58      4,96
 Peru sol                        3,267      0,15     -0,92
                                                  
 Argentina peso                21,8000      5,50    -14,68
 (interbank)                                      
                                                  
 Argentina peso                  21,45     -1,63    -10,35
 (parallel)                                       
                                                  
 

 (Reporting by Gram Slattery and Hugh Bronstein
Editing by Jeffrey Benkoe)
  
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