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Weak dollar boosts Latam FX, stocks

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Traders price in more US rate cuts

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Panama presidential election on Sunday

By Sruthi Shankar

May 3 (Reuters) - Most Latin American currencies climbed

on Friday, with the Brazilian real touching a three-week high

versus the dollar after weaker-than-expected U.S. jobs data

raised expectations of U.S. interest rate cuts starting as early

as September.

The real jumped 0.6% to 5.08 per dollar, its

strongest level since April 11. Other currencies in the region

also firmed, with a broader gauge set for its

second weekly gains.

The dollar fell against major peers, global stocks

and other riskier assets rallied and U.S. Treasury yields fell

after data showed U.S. job growth slowed more than expected in

April and annual wage gains cooled.

Traders quickly priced in two U.S. rate cuts of 25 basis

points this year versus one before the payrolls data was

released. The first cut is now expected to come in September.

"Not only have the weaker headline measures fuelled Fed

easing bets, but firmer details also suggest that the recent

easing in labour conditions isn't a sign of something more

sinister afoot," said Simon Harvey, head of FX analysis at Monex

Europe.

"This has provided the perfect basis for procyclical assets

to rally, an outcome we didn't expect markets to converge upon

until early Q3."

Emerging market currencies have come under pressure this

year as several countries including Brazil, Chile and Mexico

kickstarted rate-cutting cycles early to spur their economies

even as the Fed kept interest rates elevated due to sticky U.S.

inflation and resilience in the world's largest economy.

Brazil's central bank is set to meet next week, with

economists split over the size of a likely rate cut. Of 39

economists surveyed between April 29 and May 3, 22 said the

central bank would ease by 25 basis points to 10.50%, while the

other 17 stuck to a 50-basis-point cut.

Stock markets in the region also climbed and were set for

weekly gains, mirroring an upbeat mood on Wall Street.

Investors will keep an eye on Sunday's presidential election

in Panama, where eight candidates are on the ballot, and polls

show mixed rankings among the five frontrunners.

The Central American country's government rebuked Fitch

Ratings late in March after it cut Panama's sovereign bonds to

speculative grade, or junk status. Panama is at risk of losing

the coveted investment grade following concerns over its fiscal

and governance challenges that have been aggravated by the

closure of the country's largest mine.

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1061.85 0.85

MSCI LatAm 2479.37 0.51

Brazil Bovespa 128449.76 1.04

Mexico IPC 56943.57 0.47

Chile IPSA 6560.18 0.95

Argentina MerVal 1390948.78 1.553

Colombia COLCAP 1379.04 0.02

Currencies Latest Daily %

change

Brazil real 5.0800 0.63

Mexico peso 16.9650 0.00

Chile peso 941.1 0.30

Colombia peso 3890.98 0.18

Peru sol 3.7137 0.14

Argentina peso (interbank) 878.5000 0.00