February 6, 2020 / 8:41 PM / 19 days ago

EMERGING MARKETS-Brazil real drags Latam FX lower amid dollar strength

    * China to halve tariffs on some U.S. imports 
    * Brazil's Centauro soars on Nike deal  
    * 

 (Updates prices)
    By Sruthi Shankar
    Feb 6 (Reuters) - Brazil's real fell 1% on Thursday,
reversing early gains made after the central bank signaled a
pause in interest rate cuts a day earlier, with other Latin
American currencies also coming under pressure from a strong
dollar. 
    The real neared a record low hit last week amid fears
of the fast-spreading coronavirus in China hitting global
growth. The currency was last down at 4.2825 per dollar, with
the lack of investor inflows into Brazil weighing heavily on the
real.
    The central bank on Wednesday cut the benchmark Selic rate
by 25 basis points to 4.25%, as expected, but policymakers
signaled they were ready to pause monetary easing after five
consecutive rate cuts, helping the real firm earlier in the
session.
    "You could argue that the real looks a little bit
undervalued on the basis that the economy is coming from a weak
spot, and quite frankly the future is looking brighter," said
Christian Lawrence, senior market strategist at Rabobank in New
York. 
    "That said, we're seeing a lot of pressure across emerging
markets and the only saving grace for currencies is if you have
a high carry (trade) like the Mexican peso."
    The coronavirus outbreak in China has sapped risk appetite
for developing world assets in the past weeks. But, recently,
stimulus and containment measures in China have been well
received by investors, even as the death toll from the virus
jumped to 563 in that country.
    In other news from China, its finance ministry said
additional tariffs levied on some U.S. goods will be cut to 5%
from 10% and others lowered to 2.5% from 5% starting Feb. 14.

    However, the optimism faded with currencies of Mexico
, Chile and Colombia weakening as the dollar
gained ground after a batch of strong U.S. economic data.
    Among stocks, Brazil's Bovespa fell 1%, dragged
lower by banking shares.
    Petroleo Brasileiro SA jumped 2% after confirming
that development bank BNDES raised 22 billion reais ($5.19
billion) by selling shares in the state-owned oil firm.

    Shares in Brazil's sports goods chain Centauro
soared 12% after the announcement of a $212 million deal to take
over Nike operations in the country.
    
    Key Latin American stock indexes and currencies at 20:11 GMT
    
         Stock indexes                   Latest       Daily %
                                                      change
 MSCI Emerging Markets                      1100.72       1.04
 MSCI LatAm                                 2792.42      -1.27
 Brazil Bovespa                           114878.93      -0.99
 Mexico IPC                                44630.94      -0.34
 Chile IPSA                                 4699.53       0.52
 Argentina MerVal                          40965.11      0.486
 Colombia COLCAP                            1650.91      -0.33
                                                              
            Currencies                   Latest       Daily %
                                                      change
 Brazil real                                 4.2825        1.1
 Mexico peso                                18.6684      -0.41
 Chile peso                                   783.8      -0.74
 Colombia peso                              3377.77      -0.44
 Peru sol                                    3.3748      -0.41
 Argentina peso (interbank)                 60.6800      -0.15
                                                     
 
 (Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru;
editing by Jonathan Oatis)
  
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