EMERGING MARKETS-Currencies bounce as dollar eases, stocks headed for weekly losses

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    * EM stocks index headed for 1.2% weekly declines
    * Chilean peso firms as economic activity jumps 
    * Venezuela to subtract six zeros from currency

    By Shreyashi Sanyal
    Oct 1 (Businesshala) - Most emerging market currencies firmed
against an easing dollar on Friday, with the Mexican peso and
South Africa's rand leading gains, while stocks marked a dour
start to the fourth quarter on slowing growth and rising
inflation worries. 
    Investor-favorite carry trade currencies like Mexico's peso
 and the South African rand rose about 0.7% each,
as the dollar retreated from gains made earlier in the day on
bets that U.S. Federal Reserve will be tightening its monetary
policy much sooner than expected.
    A carry trade is when investors borrow in a low-yielding
currency to invest in higher-yielding assets, which has often
helped these currencies stay afloat and outperform regional
peers this year.
    Mexico's peso is headed for weekly declines of over 2%,
while the rand tracked nominal gains for the week.     
    The Brazilian real also firmed against the
dollar, but was still set for declines of 1.1% for the week. 
    Chile's peso found support from a bounce in prices of
its main export, copper, to rise 0.5% off 15-month lows. The
currency slipped 10% last quarter and is set for weekly declines
of 1.6%. 
    Data showed Chile's economic activity jumped
19.1% in August versus the same period the previous year.

    The MSCI's emerging market stocks index fell 0.4%,
for the third time this week as data showed weakening
manufacturing activity across Asia as well as Russia in
September due to curbs to contain the latest wave of the
coronavirus pandemic, as well as indications of slowing growth
in China.
    The index is set for weekly declines of 1.2%, while its
Latin American counterpart fell 2.5% for the
week. 
    However, analysts are positive on emerging market equities
based on current valuations. 
    "They (EM stocks) trade at a discount to the developed world
despite strong growth potential and headroom for credit
consumption," strategists at Franklin Templeton wrote in a
client note. 
    "Latin America is rich in natural resources and looks to
benefit from the commodity boom taking place amid the recovery
from the pandemic."
    In other parts of Latin America, Venezuela will launch its
second monetary overhaul in three years by cutting six zeros
from the bolivar in response to hyperinflation, simplifying
accounting but doing little to ease the South American nation's
economic crisis.
    The International Monetary Fund said on Thursday that its
board had approved an agreement with Ecuador to revise the terms
of a financing deal reached last year, and would immediately
disburse some $800 million to the South American country.

    
    Key Latin American stock indexes and currencies at 1326 GMT:
    
         Stock indexes                  Latest    Daily %
                                                   change
 MSCI Emerging Markets                   1248.60     -0.36
 MSCI LatAm                              2251.54      1.04
 Brazil Bovespa                        111091.43       0.1
 Mexico IPC                                 0.00         0
 Chile IPSA                              4357.13     -0.13
 Argentina MerVal                           0.00         0
 Colombia COLCAP                         1361.95      0.11
                                                          
            Currencies                  Latest    Daily %
                                                   change
 Brazil real                              5.3979      0.94
 Mexico peso                             20.4840      0.71
 Chile peso                                803.1      0.96
 Colombia peso                           3774.61      0.81
 Peru sol                                 4.1225     -0.05
 Argentina peso (interbank)              98.7700     -0.02
                                                  
 Argentina peso (parallel)                   183      2.19
                                                  
 

 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Giles
Elgood)
  
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