January 20, 2020 / 7:17 PM / 3 months ago

EMERGING MARKETS-Brazil's real weakens after minister's comments, Chilean peso up

    * Brazil minister says weak FX, interest rates "new normal"
    * Chilean peso bounces on high copper prices
    * Trading volumes low on account of U.S. holiday 

 (Updates prices, adds details)
    By Ambar Warrick
    Jan 20 (Reuters) - Brazil's real weakened on Monday after
the country's economic minister flagged weakness in the currency
as the "new normal," while the Chilean peso firmed on the back
of strong copper prices. 
    Brazilian Economy Minister Paulo Guedes said in an interview
that the country's economy had entered a new phase of low
interest rates and a weak currency, a reversal of the prevailing
set of circumstances for much of the previous several years.

    The comments come amid slow economic growth and record-low
interest rates in Latin America's largest economy, which have
weighed heavily on the real and made it less attractive
as a "carry trade" currency.
    The real weakened about 0.6% to the dollar, with analysts
also suggesting the country would miss out on the broader
risk-on sentiment bought about by the signing of an interim
Sino-U.S. trade deal last week.
    "The Brazilian real is the worst performer with its small
trade exposure to China limiting support from the signing of the
U.S./China Phase 1 trade deal," said Jane Foley, senior FX
strategist at Rabobank.  
    Chile, the world's top producer of copper, saw its peso
 firm about 0.5% to the dollar after data on Friday showed
a surprise jump in Chinese industrial output, pointing to
recovering demand in the metals importer, which pushed copper
prices to eight-month highs.
    The peso was stronger for a second straight day.
    Broader Latin American currencies were
largely subdued against a stronger dollar, although a holiday in
the United States also prompted reduced trading volumes. 
    Markets will now focus on a string of central bank meetings
later in the week, as well as the World Economic Forum in Davos,
    Latin American equities were a touch lower,
having marked strong gains on Friday amid optimism over the
U.S.-China trade deal.
    Brazil's main stock index fell 0.1% with shares of  
B3 SA, the operator of the Sao Paulo stock exchange,
down 1%.
    Mexican stocks were largely unchanged, while
Argentine stocks rose to a near one-month high.
    Key Latin American stock indexes and currencies at 1900 GMT:
    Stock indexes             Latest    Daily % change
 MSCI Emerging Markets         1144.91            -0.17
 MSCI LatAm                    2918.59            -0.21
 Brazil Bovespa              118332.21            -0.12
 Mexico IPC                   45842.59             0.05
 Chile IPSA                    4814.37            -1.37
 Argentina MerVal             43131.92            1.871
 Colombia COLCAP               1651.40            -0.28
       Currencies             Latest    Daily % change
 Brazil real                    4.1895            -0.61
 Mexico peso                   18.6680            -0.07
 Chile peso                      769.4             0.40
 Colombia peso                    3330             0.02
 Peru sol                        3.316             0.15
 Argentina peso                59.9500             0.10

 (Reporting by Ambar Warrick and Shreyashi Sanyal in Bengaluru;
editing by Nick Macfie and Tom Brown)
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