May 21, 2020 / 2:48 PM / 13 days ago

EMERGING MARKETS-Latam FX rally, Brazil's real jumps 2% as c.bank assures support

    By Susan Mathew
    May 21 (Reuters) - Brazil's real jumped 2% after the central
bank said it remained ready to increase support for the
currency, while Mexico's peso hit its highest in nearly two
months as oil prices rallied.
    But as the novel coronavirus pandemic speeds through the
region, analysts warn the Latin American economy may shrink at a
record pace this year due to measures to contain the virus and
take at least another two years to recover.   
    Brazil is seen soon becoming the second-worst hit globally
as the number of cases approaches 300,000, while Mexico reported
a surge in cases after reopening its economy. 
 
    But against a steady dollar on Thursday, currencies of
Mexico and Colombia both rose around 1.4% as
recovering demand lifted oil prices.

    Brazil's real jumped after central bank President
Roberto Campos Neto said the bank would dip into its large pool
of foreign exchange reserves and continue intervening in the
currency market if needed, to support the currency which has
lost close to 30% of its value against the dollar so far this
year.
    Amid increasing political uncertainty in Brazil, the
government's remaining 'super minister,' Economy Minister Paulo
Guedes, has the full support of his team, a senior ministry
official said on Wednesday.
    In Mexico, the government was open to dialogue about recent
rule changes in the electricity sector that had sent the local
stock market plunging, President Andres Manuel Lopez Obrador
said on Thursday. Mexico's IPC index was down
0.4%. 
    But most other Latam bourses rose with Brazil's benchmark
index hitting a three-week high.
    "We think Latin America offers the most value in EM equities
– Bovespa likely the best rebound candidate," said Goldman Sachs
strategists in a note.
    "Latin America's underperformance versus the rest of EM
since January has opened up significant value across assets on
both a relative and an absolute basis," they said, also
highlighting tail-winds from an expected pick-up in commodity
prices in the second half of 2020.
    Argentina's peso continued its slide deeper into
record low territory as the country scrambles to strike a deal
with creditors and avoid a ninth sovereign debt default. The
country is edging toward a deal but negotiations will likely
spill beyond a Friday deadline, the government said.

    Meanwhile, data showed the pandemic plunged economic
activity in the country down 11.5% in March.
        
    Key Latin American stock indexes and currencies at 1416 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     932.46      0.1
                                   
 MSCI LatAm               1688.39     3.09
                                   
 Brazil Bovespa          82671.59     1.66
                                   
 Mexico IPC              35902.87    -0.34
                                   
 Argentina MerVal               -        -
                                   
 Colombia COLCAP          1074.23     0.18
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.5773     1.99
                                   
 Mexico peso              22.8496     1.49
                                   
 Colombia peso             3773.4     0.85
                                   
 Peru sol                  3.3917     0.27
                                   
 Argentina peso           68.0800    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Andrea
Ricci)
  
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