February 7, 2020 / 8:55 PM / 14 days ago

EMERGING MARKETS-Brazil's real hits all-time low amid emerging FX selloff

 (Updates prices)
    By Susan Mathew
    Feb 7 (Reuters) - Brazil's real hit an all-time low on
Friday amid a selloff in emerging market currencies and stocks,
sparked by a strong dollar and concerns about the coronavirus
outbreak taking a toll on global growth.
    The real fell 0.9% to 4.3204 per dollar and was on
course for its sixth weekly drop, with traders testing the
central bank's resolve not to intervene in the market to arrest
its decline.
    The central bank on Wednesday issued a surprisingly clear
forward guidance that the easing cycle was over after it cut
interest rates to a record low as widely expected.
    "The historically low key rate remains a burdening factor
for the BRL, especially since the real interest rate is now
close to zero," wrote You-Na Park-Heger, an analyst at
Commerzbank. 
    "We therefore see no scope for a recovery in the BRL for the
time being," she said, adding that a moderate pick-up in the
currency can be expected in the second half of the year as the
government's reform efforts take effect and as the economy
gradually recovers. 
    Brazilian data showed that consumer prices rose by 0.21% in
January, its smallest rise since 1994, driven by a sharp decline
in meat prices.
    Meanwhile, the MSCI index of emerging market currencies
 slumped 0.7% to record its worst day since
August as the dollar gained favor from strong U.S. economic data
and a dovish turn from many developing world central banks hurt
currencies.
    Investors have also been grappling with the potential impact
from the virus outbreak in China, where the death toll climbed
to 636 and the number of infected cases rose above 30,000,
hitting commodity prices, prompting companies to suspend
operations and tempering growth expectations for China.

   Falling oil prices knocked 0.1% off the Colombian peso
and put it on course for its third consecutive day of losses,
while Mexico's peso fell 0.7%.
    The Chilean peso gave up 0.9% as prices of copper,
its main export, slipped.
    The risk-off mood drove an index of Latin American equities
 down 1.8%.
    Brazil stocks fell 1% as iron ore miner Vale
weighed, while reinsurer IRB Brasil Resseguros SA
dropped 6.6%, leading declines on the index. 
     
    Latin American stock indexes and currencies at 2010 GMT:
 
      Stock indexes                Latest      Daily % change
 MSCI Emerging Markets               1089.24             -1.19
                                              
 MSCI LatAm                          2751.41             -1.84
                                              
 Brazil Bovespa                    113936.23             -1.09
 Mexico IPC                         44263.26             -0.52
 Chile IPSA                          4686.83             -0.27
                                              
 Argentina MerVal                   41169.38             0.644
                                              
 Colombia COLCAP                     1651.53             -0.15
                                              
                                                              
         Currencies                Latest      Daily % change
 Brazil real                          4.3204             -0.91
                                              
 Mexico peso                         18.7933             -0.74
                                              
 Chile peso                            790.7             -0.87
                                              
 Colombia peso                          3414             -1.06
 Peru sol                              3.388             -0.39
                                              
 Argentina peso (interbank)          60.7775             -0.15
                                              
 
 (Reporting by Susan Mathew and Sruthi Shankar in Bengaluru;
editing by Grant McCool)
  
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