Nov 17 (Reuters) – Emerging market currencies hit their highest in nearly four months on Friday as rising bets on U.S. interest rate cuts subdued the dollar, with Mexico’s peso extending gains for a sixth straight session. Data this week showing cooling U.S. inflation and a loosening labour market fanned hopes that the Federal Reserve could begin cutting rates in May and deliver 100 basis points worth of cuts through next year. U.S. 10-year treasury yields hit two-month lows and the dollar was headed for a weekly loss. MSCI’s index of EM currencies rose 0.3%, on course for its biggest weekly gain in four months. “U.S. Treasury yields have been setting the tone for the EM FX space throughout this week and today’s session is no exception,” said Piotr Matys, senior FX analyst at In Touch Capital Markets. “The yield on the U.S. 10-year is leaning towards yet another important pivot at 4.3618%. A close well below it on a weekly basis would strengthen the short-term downside bias… This in turn should translate into further gains in the EM FX space, at least over the short-term horizon.” EM currencies have risen 2.8% this year, outperforming a 0.6% gain for the U.S. dollar. Mexico’s peso rose 0.2% to near two-month highs and was set for a weekly gain of about 2.6%. Chile’s peso rose for a fourth straight session and was last up 0.3% at 881.50 per dollar. Brazil’s real fell 0.3% with data showing the economy ended the third quarter in negative territory, reversing a performance that had been surprisingly positive due to a booming farming sector. Argentine markets will be in focus next week as Economy minister Sergio Massa and populist outsider Javier Milei go head-to-head in a presidential election run-off on Sunday. The winning candidate will take office on Dec. 10, needing to fix an economy with inflation of 143%, a messy array of capital controls, a looming recession and no foreign currency reserves. Emerging market stocks fell, hurt by a 10% slump in the shares of Chinese heavy-weight Alibaba after it scrapped plans to spin-off its cloud unit. While most Asian stock indexes were in the red, shares elsewhere were doing better. Brazil’s Bovespa index climbed 0.4% to a more than three-year high, with oil major Petrobtas up 1% as it tracked a rising oil prices. The company faces pressure from the country’s mines and energy minister to reduce diesel and gasoline prices at its refineries. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 977.33 -0.5 MSCI LatAm 2455.01 -0.25 Brazil Bovespa 125090.38 0.36 Mexico IPC – – Chile IPSA – – Argentina MerVal – – Colombia COLCAP – – Currencies Latest Daily % change Brazil real 4.8848 -0.32 Mexico peso 17.2059 0.10 Chile peso 879.4 0.40 Colombia peso 4076.76 0.19 Peru sol – – Argentina peso (interbank) – – (Reporting by Susan Mathew in Bengaluru; Editing by Kirsten Donovan)
