The Chilean peso led rising Latin American currencies on Friday, as copper prices scaled to near eight-month highs and investors remained optimistic about a trade deal between the United States and China being signed soon.
The peso firmed against a weaker dollar, outperforming its Latin American peers, as copper prices hit their highest since May after a report showed profits at industrial companies in top metals consumer China grew at their fastest pace in eight months.
The peso also continued to gain a day after a monthly poll of 61 traders showed the central bank is expected to maintain Chile's interest rate at 1.75% until at least January 2021.
The data along with comments from Beijing that it was in close contact with Washington about an initial trade agreement added to the upbeat mood.
MSCI's index for Latin American currencies rose 0.2%, putting it on track to post its strongest monthly gain since January.
The index was also set to rise for a fourth straight week.
Market players have recently placed heavier bets on emerging market assets as Sino-US trade tensions have cooled after the two sides agreed upon a preliminary truce earlier in December.
"The main reason behind the broad EM rally is the optimism about the phase one trade deal between the US and China.
The trade war, however, is far from over.
In our view this is just a temporary truce," Piotr Matys, senior emerging markets FX strategist at Rabobank, wrote in a note.
The Argentine peso will be in focus on Friday, as the country's central bank said on Thursday it cut its benchmark interest rate to 55% from 58%, part of the new government's plan to activate Latin America's No. 3 economy.
Stocks on the other hand edged lower, with the MSCI's index for Latin American equities off 0.2%.
Sao Paulo stocks ticked lower after hitting an all-time high.
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