EMERGING MARKETS-Mexico peso rebounds, Brazil real's slump deepens
(Recasts with Mexico peso gains, closing prices) MEXICO CITY, April 24 (Reuters) - Mexico's peso bounced back from a steep selloff on Tuesday, boosted by optimism the country would strike a new trade deal with the United States, while worries about elections drove Brazil's currency to a 16-month low. U.S. President Donald Trump said that a new North American Free Trade Agreement could be hatched quickly as officials from Mexico, Canada and the United States held talks in Washington in hopes of tying up a deal in the coming days. Mexico sends around 80 percent of its exports to its northern neighbor and the currency has whipsawed since Trump's election in late 2016 over the shifting outlook of the NAFTA deal. Mexico's peso gained nearly 0.7 percent, clawing back a day after its worst one-day percentage loss since Trump was elected after promising to scrap the NAFTA deal. Emerging market currencies had broadly weakened on Monday as U.S. Treasury yields shot up to a four-year high, lifted by expectations of a wider fiscal deficit and faster inflation. After briefly breaching the 3-percent milestone early on Tuesday, yields on benchmark U.S. Treasury notes fell back, rekindling appetite for battered, higher-yield assets. The Colombian peso, which had led losses on Monday on the heels of a crude selloff, strengthened 1 percent as London oil futures earlier broke above $75 a barrel. Analysts thought the gains could be short-lived due to concerns about a faster pace of U.S. rate hikes. The Brazilian real weakened nearly 0.5 percent to close at 3.4685 per dollar, its weakest since December 2016. The currency extended a recent stretch of underperformance as traders fretted over October's election, the country's most uncertain presidential race in decades. Some investors had predicted that the arrest of former President Luiz Inácio Lula da Silva, who was leading polls and had rallied against the current government's austerity platform, would usher in the ascent of more market-friendly candidates. But recent polls have shown the Brazilian electorate as highly fragmented and unsatisfied with the likely candidates, raising doubts over efforts to curb a growing budget deficit. "Our bullish story was mostly based on (recovering) confidence ... but the election process is not moving in the expected direction," strategists at Santander wrote in a client note. Key Latin American stock indexes and currencies at 2121 GMT: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 1,154.21 -0.35 -0.37 MSCI LatAm 2,979.18 -0.99 5.34 Brazil Bovespa 85,469.08 -0.16 11.87 Mexico IPC 48,046.80 -0.82 -2.65 Chile IPSA 5,674.35 -0.53 1.97 Chile IGPA 28,542.40 -0.45 2.01 Argentina MerVal 30,568.86 -1.2 1.67 Colombia IGBC 12,381.16 -1.09 8.89 Venezuela IBC 22,316.92 -8.23 1666.78 Currencies Latest Daily YTD pct pct change change Brazil real 3.4685 -0.48 -4.47 Mexico peso 18.8220 0.66 4.70 Chile peso 598.6 0.65 2.68 Colombia peso 2,782.6 1.05 7.17 Peru sol 3.23 0.12 0.22 Argentina peso 20.2575 0.01 -8.18 (interbank) Argentina peso 20.54 0.15 -6.38 (parallel) (Reporting by Sheky Espejo in Mexico City and Bruno Federowski in Sao Paulo; editing by G Crosse)