Brazil's real up 1pc, Chilean peso lags as copper slips

Most Latin American currencies firmed on Thursday on higher commodity prices, with investors waiting to see if US Federal Reserve Chair Powell would address rising Treasury yields in a talk later in the day.

Mexico's peso and the Colombian currency rose 0.4% and 0.8% respectively as oil prices trended higher ahead of an OPEC+ meeting that is expected to extend supply cuts.

A Reuters poll showed Mexico's peso will follow a more erratic path next quarter because of concerns about President Andres Manuel Lopez Obrador's nationalist energy push.

Difficulties in dealing with the COVID-19 pandemic also weigh. Majority strategists polled see the peso at 19.97 per US dollar in one year's time.

"MXN appears to be facing a more contained upside potential if oil keeps rising: despite a short-term undervaluation, MXN is overvalued in real terms," FX and commodity strategists at ING said in a note.

The peso was last trading at 20.87 per dollar.

Fed Chair Powell's talk at 1705 GMT will be monitored for any hints of concern about last week's jump in bond yields, but investors see a high bar for him to take action.

"The higher-beta (EM) currencies could do relatively well - even in an environment of rising rates - as long as global recovery expectations remained firm," analysts at TD securities said.

Another Reuters poll showed EM currencies of commodity-exporting nations are set to firm over the next 12 months as the world recovers from the pandemic.

Iron ore-exporting Brazil's real was expected to gain about 12% in 12 months to 5.1 per US dollar, while top copper producer Chile's peso was seen at 722.5 per greenback.

The real was up 1% on Thursday, although sliding copper prices saw Chile's currency underperform.

"The real is moderately undervalued versus the dollar according to our short-term fair value model," said ING, adding that a downtrend in iron ore prices should have a "somewhat contained" negative impact on the currency.

Among stocks, banks led a 1.7% rise in Brazil's Bovespa stock index, while Chilean lithium producer SQM fell 1.4%. SQM posted record lithium sales in the fourth quarter, although floundering prices for lithium weighed on the company_s profits.

Chilean President Sebastian Pinera announced a new plan to overhaul the country_s heavily criticized pension plan - a principal demand of protesters during widespread riots in 2019 that had hammered the peso.