May 13, 2020 / 8:33 PM / 20 days ago

EMERGING MARKETS-Mexican peso up on easing virus curbs, Brazil's real off on political flux

    * Mexico to open up some car factories from Monday 
    * Brazilian real falls for third straight day
    * Chilean central bank says financial system not hard hit

 (Adds comments, updates prices throughout)
    By Shreyashi Sanyal
    May 13 (Reuters) - Mexico's peso rose on Wednesday, as the
country unveiled plans to reopen some portions of its economy
from May 18, while intensifying political uncertainty in Brazil
weighed on its currency. 
    Most Latam bourses followed Wall Street into
the red after U.S. Federal Reserve Chairman Jerome Powell warned
of a prolonged recession due to the pandemic. The dollar rose
after Powell dispelled speculation about negative interest
rates.    
    Rising fears of a second wave of COVID-19 and nagging
tensions between Washington and Beijing also pressured markets.

    Mexico gave a green light to restarting some automotive
factories from Monday and said mining, construction and
manufacturing of transport equipment will be considered
essential activities.  
    The peso firmed 0.9%, while stocks fell 2.7%. All
eyes will now be on the Mexican central bank's policy meeting on
Thursday. 
    "Banxico will cut by 50bps, but see a not-insubstantial risk
of a larger move, albeit with a nuanced message from the central
bank," said Sacha Tihanyi, deputy head of emerging markets
strategy at TD Securities.  
    Brazil's real underperformed as new evidence in a
probe revealed that President Jair Bolsonaro planned to change
the federal police chief in Rio de Janeiro to protect his family
from investigation.
    Brazil's prosecutor general is to decide whether to charge
the president with obstruction of justice and abuse of power. If
the Supreme Court and two-thirds of the lower house of Congress
see merit to any charges, Bolsonaro would be suspended and would
stand trial. 
    "Whether or not this will happen is difficult to assess at
present," said You-Na Park-Heger, FX and emerging markets
analyst at Commerzbank.  
    "What is clear, is that the time for a political crisis is
extremely bad. In the short term, we see the Brazilian real
under depreciation pressure, as there is uncertainty about
whether the situation will worsen."
    Bolsonaro's popularity has plummeted on his handling of the
COVID-19 outbreak. Bolsonaro fought states over his wish to
reopen gyms and beauty parlors as his country has become a
global hotspot for the pandemic.
    Sao Paulo-listed stocks rose on a materials boost.
Iron ore miner Vale rose 2.3% even after the
Norwegian sovereign wealth fund - the world's largest -
announced it would exclude Vale from its portfolio due to
environmental and human rights issues.        
    Chile's peso climbed 0.9% against the dollar as the
central bank said the financial system has experienced "unusual
stress and volatility" but no major episodes of disruption, in a
financial stability report published on Wednesday.
    Colombia's currency fell 0.8% and the stock benchmark
 extended losses for a fourth day as the country's
coronavirus caseload grew. 
            
    Key Latin American stock indexes and currencies at 2009 GMT:
    
     Stock indexes               Latest       Daily %
                                              change
 MSCI Emerging Markets             908.71          -0.07
                                           
 MSCI LatAm                       1532.29          -2.85
                                           
 Brazil Bovespa                  77912.94           0.05
                                           
 Mexico IPC                      36394.22          -2.85
                                           
 Chile IPSA                       3604.86          -3.48
                                           
 Argentina MerVal                37796.30         -3.418
                                           
 Colombia COLCAP                  1055.27          -3.12
                                           
                                                        
         Currencies              Latest       Daily %
                                              change
 Brazil real                       5.9048          -0.07
                                           
 Mexico peso                      24.1971           0.65
                                           
 Chile peso                         817.6           0.60
                                           
 Colombia peso                    3902.85          -0.70
 Peru sol                          3.4388          -0.17
                                           
 Argentina peso (interbank)       67.5400          -0.12
                                           
 

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
Editing by David Gregorio and Alistair Bell)
  
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