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EMERGING MARKETS-Brazil's real leads Latam FX losses on fiscal concerns

    * Brazilian govt confirms stimulus plans
    * Mexican inflation rises more than expected
    * Latam stocks lag EM peers

    By Ambar Warrick
    Feb 9 (Reuters) - Brazil's real led losses across Latin
American currencies on Tuesday on concerns over
lower-than-expected inflation and stretched fiscal spending,
while Chile's peso rose tracking higher copper prices.
    The real fell 0.7% as monthly inflation slowed in
January on a sharp fall in electricity prices, which led to some
scaling back of near-term expectations for an interest rate
hike.
    But the annual rate of inflation remained high and well
above the central bank's year-end target, indicating that a rate
hike at the bank's next meeting was possible.
    Approval of more local stimulus is also expected to increase
inflation and spur rate hikes. President Jair Bolsonaro
confirmed Latin America's largest economy was preparing a fresh
round of cash transfers to millions of vulnerable people.

    But investors were concerned that the increased spending
could result in the government breaching its spending cap,
pushing up market-based interest rates and pushing down the
currency. 
    The country had posted a record deficit in 2020 due to the
COVID-19 pandemic, and is struggling to rein in infections.
    "The Brazilian central bank recently prepared the markets
for an imminent rate hike. The only question is how quickly such
a step would be taken," analysts at Commerzbank wrote in a note.
    "Moreover, the question about additional fiscal policy
measures to support the stricken economy is likely to remain an
issue. Against this background we see little scope for BRL
appreciation for now, even if the central bank were to initiate
a rate hike cycle soon."
    Brazil stocks were flat in early trade, while the
MSCI's index of Latam stocks dropped more than
1%, as they continued to lag their emerging market peers this
year.
    Latam assets had lagged their broader peers in 2020 as well,
owing to relatively higher COVID-19 spreads and concerns over
economic health, given that several regional economies were
facing headwinds even before the outbreak. 
    Chile's peso rose 0.2%, extending gains to a second
day as copper prices rose on expectations of increased demand
through the release of more global stimulus.
    Chilean stocks also rose slightly.
    Mexico's peso edged higher after annual inflation
rose faster than expected in January. The reading raised
expectations that the country's central bank would hold rates at
its meeting later in the week.
    
    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1404.26               0.32
                                        
 MSCI LatAm                    2384.55              -1.21
                                        
 Brazil Bovespa              119500.37              -0.16
                                        
 Mexico IPC                          -                  -
                                        
 Chile IPSA                    4490.30               0.07
                                        
 Argentina MerVal                    -                  -
                                        
 Colombia COLCAP               1383.38                  - Currencies             Latest     Daily % change
 Brazil real                    5.4107              -0.73
                                        
 Mexico peso                   20.0770               0.12
                                        
 Chile peso                      732.4               0.23
                                        
 Colombia peso                 3582.58              -0.37
 Peru sol                       3.6408               0.00
                                        
 Argentina peso                88.2700              -0.11
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru; Editing by Andrea
Ricci)
  
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