EMERGING MARKETS-Latam currencies rally as dollar weakens, Brazil’s real volatile

* Latam shares, FX rally * Brazil’s real forecasts volatile trading * Colombia could hike rates further (updates prices, adds market analyst’s comment) by Susan Mathew and Amruta Khandekar, Oct 4 (Reuters) – Latin American most Currencies rallied on Tuesday as the dollar weakened on a fall in US Treasury yields while the Brazilian real struggled for direction after a stellar session fueled by Sunday’s election outcome. Briefly reversing session gains after rising around 5% on Monday, the Brazilian real was last up 0.3% against the dollar. Investors saw their political worries ease as far-right President Jair Bolsonaro edged left-wing rival Luiz Inacio Lula da Silva in the first round of the presidential election by a much narrower margin than opinion polls had shown. “What you get with Brazil is a lot of uncertainty about who is really going to take power at the end,” said Juan Perez, director of commerce at Monex USA in Washington. “Bolsonaro is seen as someone who is more outspoken globally, while with Lula there will be more doubts about what he will bring to the table. If Lula wins, I think it will be negative for the BRL against the dollar.” Meanwhile, stocks in the region joined a global rally as weak US manufacturing data led to bets that the Federal Reserve could be forced to expand its aggressive policy tightening, which sent government bond yields and the dollar down from recent highs. But to keep investors cautious, San Francisco Fed President Mary Daly said on Tuesday that more rate hikes are needed and that tightening policy should be maintained until inflation can ease to the Fed’s 2% target. As copper prices rose, top producer Chile’s peso jumped to a near two-week high, while higher oil prices pushed crude oil exporter Colombia’s peso up 0.7%. Minutes of last week’s Central Bank of Colombia meeting showed that further hikes in the benchmark interest rate may be needed in the coming months. Colombia hiked interest rates by 100 basis points to 10% last Thursday. The Mexican peso extended gains for a third straight session. With inflation hovering at a 22-year high, Mexican officials on Monday announced the details of a new deal with companies to halt rising food prices and doubled down on working with the private sector. The agreement allows food manufacturers and retailers to waive certain regulatory requirements, the government said. In Argentina, the government announced measures aimed at boosting tech exports to $10 billion by 2023 as it seeks to help the central bank shore up its foreign exchange reserves. Latin American Stock Indices and Currencies at 1859 GMT : Stock Indices Last Daily % Change MSCI Emerging Markets 894.92 2.14 MSCI Latam 2235.50 1.33 Brazil Bovesspa 116253.58 0.1 Mexico IPC 45966.74 1.18 CHILE IPSA 5248.10 2.044 Argentinaes MVAL5 Real1300 MVAL Exchange Rate, Brazilian Real1003.10 2.040 19.9540 0.33 Chilean peso 930.9 0.97 Colombian peso 4490.63 0.75 Peruvian sol 3.9436 0.07 Argentinan peso 148.5800 -0.23 (interbank) Argentinan peso 278 2.16 (parallel Baum and Grant McCool)

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