EMERGING MARKKETS-Brazil’s true set to recoup weekly lost as the dollar slides

(Adds, comments, prices throughout) Shreyashi Sanyal and Sruthi Shankar Jan 6 (Reuters – Latin American currencies rallied Friday as the Brazilian real sought to recoup its losses this week after data showed that the U.S. saw a moderated in wage growth. The real rose 2.1% to $5.23 per dollar, its highest level since Dec. 29. Meanwhile, the Mexican peso, Chilean and Colombian pesos increased between 1.1% and 2.2%. After data showing that the U.S. added jobs at a steady pace in December, the dollar fell against its major peers. However, investors found comfort in a moderated wage growth which could allow the Federal Reserve to make smaller rate increases. Traders expected a higher chance that the U.S. central banks would raise rates by just 25% at its February meeting. Monex Europe’s head of FX analysis, Simon Harvey, stated that job gains were strong enough to dispel any concerns about recession. Wage pressures have cooled significantly from the last month data scare, to avoid fueling expectations that Fed will continue to act forcefully. “Given Powell’s implicit preference to slow down the pace at which the hiking cycle is being adjusted again at the next meeting,” we believe 25bps will be the most likely option next months, barring an increase in core service inflation. The real, which was among the best performing EM currencies for 2022, was put under pressure by concerns about Brazil’s fiscal health under President Luiz Ignacio Lula da Silva earlier this week. Lula claimed Friday that the country can grow with responsibility. This was in an attempt calm investors after the chaos in communication during the early days of the leftist administration. William Jackson, Capital Economics’ chief emerging market economist, said that the “pragmatic Lula” many had hoped for in his first election win has yet to show up. “The good news? Some of Lula’s appointees tried to calm investors’ nerves (and that has helped Brazilian assets recover lost ground). Although the Bovespa stock index saw a 0.9% increase, it was not enough to reverse weekly falls. Miner Vale rose 1.7% due to iron ore prices rising on optimism about China’s increased support for the ailing real estate sector. As China’s economy recovers, most commodity prices rose in Latin America. Latin American equities ended the week with gains totalling 2.5%. The South African rand fell 0.3% to 17.17 per $1 after falling to as low at 17.11 following a Bloomberg report that the ruling party wanted the central bank to have broader powers to support the economy and encourage employment. Latin American Stock Indexes and Currency at 1923 GMT. Brazil Bovespa 108437.77 2.28 Chile IPSA 53137.85 2.27 Argentina MerVal 215984.60 3.023 Colombia COLCAP 1306.13.53 0.59 Currencies Daily % Change Brazil Real 5.2393 2.15 Mexico Peso 19.1220 0.98 Chile Peso 840.2 1.30 Colombian peso 4857.75 2.14 Peru Sol 3.784 0.46 Argentina (interbank) 179.2400 -parallel) 350 0.17.