EMERGING MARKETS-Mexico's peso leads Latam FX gains, real lags this week

  • 7/9/2021
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* Brazil"s real down nearly 4% this week * MSCI Latam stocks down 4% this week (Updates prices) By Ambar Warrick and Susan Mathew July 9 (Reuters) - Latin American currencies recovered from recent losses on Friday but were set to end the week lower on turbulent commodity markets and concerns over Chinese economic growth. Mexico"s peso led the charge, up 0.8% and capping weekly losses at around 0.4% as the dollar slipped on profit taking. MSCI"s index of Latam currencies was up 0.6%, breaking a 9-day losing streak. "Risk sentiment seems to be finding its footing again," said Mazen Issa, senior FX strategist at TD Securities. Chile"s peso rose 0.7%, tracking higher copper prices after major importer China cut the amount of cash that banks need to hold to boost an economic recovery. But China"s move to cut the reserve requirement ratio (RRR) raised broader questions over the pace of an economic recovery in the country, given that it has so far led a post-COVID economic bounce. An economic slowdown in China would be negative for Latin America given the region"s large dependence on China as a destination for agriculture and mining exports. "We think this week was in part driven by a growth scare amid some concern for rising infections that made hawkish pivots by central banks a bit ambitious," he said. "Typically, a cooling in growth has led to a moderation in risk." On the week, emerging currencies were set to end lower, with a 3.8% percent drop by Brazil"s real being the steepest. The real did not trade on account of a holiday on Friday. Growing concerns over political unrest in the country have detracted from the real"s appeal. Two polls on Thursday showed President Jair Bolsonaro"s disapproval ratings rose to the highest level since he came to power 2-1/2 years ago, amid growing discontent over his administration"s handling of the COVID-19 pandemic. Colombia"s peso ended the week down more than 2%. Wild swings in oil prices after the breakdown of OPEC talks hampered the currency through the week. Most Latin American stocks rose in early trade, tracking a broader recovery in global markets after steep losses through the week. MSCI"s index of regional stocks was set to lose 4% this week, its worst week in more than four months. Argentine markets were closed for a holiday. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1319.38 0.24 MSCI LatAm 2511.62 0.81 Mexico IPC 49709.64 0.28 Chile IPSA 4232.44 1.06 Colombia COLCAP 1294.65 0.83 Currencies Latest Daily % change Mexico peso 19.8534 0.71 Chile peso 748.3 0.56 Colombia peso 3827 0.26 Peru sol 3.9646 -0.41 (Reporting by Ambar Warrick; Editing by Dan Grebler and Andrew Heavens) Our Standards: The Thomson Reuters Trust Principles.

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