* Latam FX firm, rest of EM flat
* Rouble bounces as traders reassess geopolitical risks
* Sberbank, VTB shares rebound after escaping UK sanctions
* Turkish lira plunges as Ukraine war fears threaten
economies
By Anisha Sircar and Shreyashi Sanyal
Feb 22 (Reuters) - Most Latin American currencies edged
higher against the dollar on Tuesday, while Russian assets
recovered after a Kremlin spokesperson said Moscow remained open
to diplomacy, temporarily calming some fears of a war in
Ukraine.
The MSCI's index for Latin American currencies
gained 0.3%, while its emerging markets
counterpart was flat.
The Kremlin said it hoped Russia's recognition of two
breakaway Ukrainian regions as independent would help restore
calm and that Moscow remained open to diplomacy with the United
States and other countries.
"Our core scenario on this crisis is for tensions to stay
elevated but a full-scale conflict being avoided. We continue to
view this as the most likely scenario," said Charles-Henry
Monchau, chief investment officer at Bank Syz in Geneva.
"We do not see any reason to panic at this stage. While most
western media comments sound alarming, we might actually get
close to 'peak fear' on this crisis and there is a high
probability that tensions will start to abate from here on."
The rouble reversed course to rise 1.6%, bouncing
back from its weakest level in nearly two years, while Russian
stocks edged higher.
Shares of Russia's two largest lenders, Sberbank
and VTB, reversed early losses to jump after the
United Kingdom slapped sanctions on five Russian banks, but
spared the two key state banks.
Most major south and central American currencies advanced,
with Brazil's real rising 1% to lead gains.
Currencies of oil-exporters Mexico and Colombia
, also rose as oil prices jumped to their highest level
since 2014.
Stocks across Latin America gained 1.1%.
Latin American equities have outperformed their developed world
counterparts with some investors betting on more returns amid a
hawkish stance from the U.S. Federal Reserve and deeply
discounted stocks after a pandemic-driven rout and rising
commodity prices.
"Latin American markets will likely attract investors with
higher interest rates but a less optimistic global economic
recovery could disrupt the recovery," said Edward Moya, senior
market analyst at OANDA.
"The Brazilian real is becoming a favorite as traders focus
on surging commodity prices and interest rate differential,
while overlooking the political uncertainty that is coming up
with the presidential election."
Meanwhile, the Turkish lira weakened 1.1% against the
dollar, nearing its weakest level this year, as the escalating
tensions pose a risk to Turkey's macroeconomic stability.
The NATO member has control over passage of vessels between
the Mediterranean and Black Sea, making it a potentially key
player in any military conflict between Russia and Ukraine.
Key Latin American stock indexes and currencies at 1519 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 1207.55 -0.98
MSCI LatAm 2402.69 1.15
Brazil Bovespa 113178.99 1.3
Mexico IPC 52327.99 0.58
Chile IPSA 4495.21 -0.68
Argentina MerVal 90952.83 1.026
Colombia COLCAP 1503.11 0.54
Currencies Latest Daily %
change
Brazil real 5.0493 1.10
Mexico peso 20.3139 -0.09
Chile peso 796.6 0.18
Colombia peso 3924.71 0.16
Peru sol 3.7411 0.19
Argentina peso (interbank) 107.1400 -0.04
Argentina peso (parallel) 208 1.68
(Reporting by Anisha Sircar and Shreyashi Sanyal in Bengaluru;
Editing by Emelia Sithole-Matarise)