June 15, 2018 / 5:00 PM / a month ago

EMERGING MARKETS-Brazil's real jumps, Argentine peso slumps to record low

    By Bruno Federowski
    BRASILIA, June 15 (Reuters) - The Brazilian currency led
gains in Latin American on Friday after the central bank
announced it will extend a currency intervention plan while the
Argentine peso slumped to a record low after the resignation of
its central bank president.
    The real firmed 1.4 percent, clawing back some of its
2.7 percent drop the previous day, the currency's worst one-day
percentage drop since May 2017. 
    The real is down 12 percent so far this year, the
second-worst performing currency in the region behind the
Argentine peso, which slumped to a new all-time low
against the dollar on Friday after the resignation of Central
Bank President Federico Sturzenegger.
    Public support in Brazil for a nationwide truckers' strike
in the final weeks of May, which forced the government to
implement costly subsidies, cast doubt over bets that the winner
of this year's presidential elections would stick to a
market-friendly platform.
    That has accentuated the effect of a global emerging markets
selloff driven by concerns over a widening U.S. fiscal deficit
and accelerating inflation, which bumped up U.S. Treasury debt
prices and weighed on demand for higher risk emerging market
assets.
    Such concerns, along with worries about a potential
U.S.-China trade war and its effect on the global economy, sent
the Bovespa over 2 percent lower with steel companies like Cia
Siderurgica Nacional and Usiminas among
the steepest decliners.
    The market's biggest gainer was petrochemical company
Braskem, which soared 18 percent, helped by talks to
be acquired by larger rival LyondellBasell Industries NV. 
    The central bank has reacted to the real's volatility by
increasing sales of traditional currency swaps, which function
like future dollar sales. Late on Thursday, the bank announced
it will keep up swap sales next week, although in a smaller
volume than in this week.
    "The market is convinced that the central bank is putting
its money where its mouth is," said Ricardo Gomes, a trader at
Correparti brokerage.
    The Mexican peso, meanwhile, strengthened around 1
percent, bouncing back from the previous day's losses which
drove it to its weakest since January 2017, when U.S. President
Donald Trump took office.
    The peso has been hit by growing concerns that Trump could
scrap the North American Free Trade Agreement, known as NAFTA,
as well as uncertainty around Mexico's own presidential
elections.
    
  Key Latin American stock indexes & currencies at 1720 GMT:
 Stock indexes                    Latest       Daily     YTD
                                                 pct     pct
                                              change  change
 MSCI Emerging Markets             1,112.45    -1.18   -2.83
 MSCI LatAm                        2,429.09    -2.03  -12.33
 Brazil Bovespa                   70,470.59    -1.33   -7.76
 Mexico IPC                       46,695.60    -1.06   -5.39
 Chile IPSA                        5,466.82    -1.05   -1.76
 Chile IGPA                       27,655.17    -0.95   -1.16
 Argentina MerVal                 30,149.41     0.11    0.28
 Colombia IGBC                    12,200.06    -0.67    7.29
                                                            
 Currencies                          Latest    Daily     YTD
                                                 pct     pct
                                              change  change
 Brazil real                         3.7604     1.35  -11.89
 Mexico peso                        20.6800     0.97   -4.74
 Chile peso                           635.5     0.05   -3.28
 Colombia peso                     2,894.19    -1.11    3.03
 Peru sol                             3.279     0.03   -1.28
 Argentina peso (interbank)         28.2700    -0.42  -34.21
                                                      
 Argentina peso (parallel)             28.1    -0.71  -31.57
                                                      
 
 (Reporting by Bruno Federowski)
  
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