December 18, 2014 / 7:38 PM / 5 years ago

EMERGING MARKETS-Colombian peso, Mexican stocks skyrocket on Fed, oil

(Updates prices, adds Mexico markets, trader quote)
    By Asher Levine and Jean Luis Arce
    SAO PAULO/MEXICO CITY, Dec 18 (Reuters) - Colombia's peso
closed sharply stronger on Thursday while Mexican stocks posted
their biggest gain in over four years as more stable oil prices
and reassuring comments by the U.S. Federal Reserve stoked risk
    Other Latin American currencies also strengthened after the
Fed offered an upbeat assessment of the U.S. economy on
Wednesday, helping offset mounting concerns over the recent
decline in oil prices and a potential financial crisis in
    Oil prices rebounded from five-year lows early in the
session, though began to retreat in afternoon trading.
    That swing was not enough to dampen a rally in Colombia's
peso, which posted its biggest gain in nearly four years,
strengthening to 2,317 per dollar, a gain of around 3.4 percent
from Wednesday's close.
    Fuel makes up about 69 percent of Colombia's merchandise
exports, according to 2013 World Bank data.
    "This has to do with oil prices and the Fed, it's all
helping reduce risk aversion," said Sebastián Díaz, an analyst
with Banco de Bogotá.
    The Fed signaled on Wednesday that it would take a
slow-going approach to rate hikes despite the strengthening U.S.
economy, reducing concerns in Latin American markets over a
sharper or sooner-than-expected interest rate rise.
    The Brazilian real strengthened for a second straight
session, rising nearly 2 percent against the dollar after
hitting its weakest level in nearly 10 years on Tuesday.
    Traders continued to cite risks, however, over the future of
the Brazil central bank's currency intervention program, which
is due to be modified in 2015. The bank has helped support the
real by providing hedging protection to local businesses via
currency swaps, though it remains unclear how the program will
be scaled down next year.
    Equities markets moved higher, with the MSCI Latin American
stock index up 2 percent.
    Mexico's IPC index was set to close with its biggest
one-day gain in over four years as traders reacted to oil prices
and the Fed.
    "We also saw some bargain-hunting at very good prices, which
helped make the rebound a bit stronger here than in other
markets," said Carlos Alonso, a trader at Interacciones in
Mexico City.
    Key Latin American stock indexes and currencies at 1924 GMT:
     Stock indexes                     daily %    YTD %
                          Latest       change     change
 MSCI Emerging Markets   934.85        1.82       -8.43
 MSCI LatAm              2666.15       2.08       -18.4
 Brazil Bovespa          48495.7       -0.45      -5.85
 Mexico IPC              42375.27      3.34       -0.82
 Chile IPSA              3802.88       0.63       2.80
 Chile IGPA              18673.86      0.71       2.45
 Argentina MerVal        7932.99       -0.53      47.15
 Colombia IGBC           11058.57      1.17       -15.40
 Peru IGRA               14330.44      1.28       -9.03
 Venezuela IBC           3941.39       0.02       44.03
 Currencies                            daily %    YTD %
                                       change     change
 Brazil real             2.6558        1.85       -11.26
 Mexico peso             14.586        -0.12      -10.67
 Chile peso              614.25        0.49       -14.35
 Colombia peso           2317          3.52       -16.62
 Peru sol                2.938         0.44       -4.94
 Argentina peso          8.5500        0.06       -24.06
 Argentina peso          13.1          0.00       -23.66

 (Additional reporting by Nelson Bocanegra in Bogota; Editing by
Leslie Adler)
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