* Chilean peso snaps three-day winning streak
* Argentina's basement bonds no bargain as IMF talks drag
* Mexico to evaluate need for tax reform after midterm
elections
(Adds bullets, updates prices throughout)
By Susan Mathew and Shreyashi Sanyal
March 12 (Reuters) - A surging dollar and rising bond yields
dented emerging market currencies on Friday, with Chile's peso
leading declines after copper prices weakened, while developing
market stocks also lost ground.
Bolstered by a strong rise in U.S. producer prices, a fresh
spike in U.S. Treasury yields sparked a risk-off move, with the
dollar reversing its fall from earlier in the week.
An index of EM currencies fell up to 0.2%,
tipping it into the red for the week. Commodity-rich Latin
America's currencies were hit further by a slide in oil, copper
and iron ore prices.
Brazil's real lost 0.4%, while top copper producer
Chile's peso slipped 1.3% after three straight days of
gains. Colombia's currency gave up 0.6%, and gained the
least among regional peers on the week - up about 1.8% compared
with a 2% rise for an index of Latam currencies.
A pull-back in U.S. bond yields on easing inflation fears
had given a fillip to EM assets earlier in the week.
Brazil's real was set for its biggest weekly rise in two
months, supported by central bank intervention and rising
expectations of an interest rate hike next week. After
intervening throughout the week, the central bank said it will
sell up to $750 million of FX swaps on Friday.
Mexico's peso fell as much as 1.6%.
Finance Minister Arturo Herrera told Reuters that Mexico's
government will study the need for a tax reform this year and is
talking to regional authorities about their fiscal requirements
to see if it is warranted.
A Mexican federal judge on Thursday ordered a temporary
freeze to a new electricity-market law championed by the
government that strengthens national power company CFE at the
expense of private sector producers.
"These legal setbacks will only intensify (President Andres
Manuel Lopez Obrador's) desire to change the constitution to
shield his energy-sector vision from further legal setbacks down
the road," said Citi Research strategists.
Political interference in economic policy is one of
significant risks cited by analysts broadly for investor
sentiment to turn sour against Latam assets.
In Argentina, bonds have hit lows in recent weeks, but
analysts and investors say they are still no bargain, given
stalled talks with the IMF, fears about a pre-mid-term election
spending binge and dry weather denting crops.
Emerging market stocks lost 0.8%, with losses among
Latam bourses led by Brazil's Bovespa losing 0.9%.
Key Latin American stock indexes and currencies at 1815 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 1346.81 -0.79
MSCI LatAm 2303.13 -0.86
Brazil Bovespa 113929.13 -0.92
Mexico IPC 47631.10 -0.09
Chile IPSA 4865.18 -0.33
Argentina MerVal 48876.25 1.066
Colombia COLCAP 1351.96 0.12
Currencies Latest Daily %
change
Brazil real 5.5621 -0.39
Mexico peso 20.7749 -0.85
Chile peso 722.2 -1.27
Colombia peso 3573.4 -0.56
Peru sol 3.7047 -0.32
Argentina peso (interbank) 90.8500 -0.07
Argentina peso (parallel) 139 0.72
(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Alexander Smith, Kirsten Donovan)
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