August 23, 2018 / 10:27 PM / 8 months ago

EMERGING MARKETS-LatAm currencies turn lower as U.S.-China trade war escalates

 (Adds NAFTA details, losses on Bovespa and MerVal; updates
    By Bruno Federowski
    BRASILIA, Aug 23 (Reuters) - Latin American currencies
snapped a string of gains on Thursday after a new round of U.S.
and China trade tariffs kicked in, escalating a months-long
trade war.
    The United States and China implemented punitive 25 percent
tariffs on $16 billion worth of each other's goods, deterring
investors from risky, high-yielding assets.
    Investors fear trade frictions between the world's top two
economies could spill over and damage shaky growth in emerging
market economies, driving them to seek refuge in the U.S.
    Currencies from Mexico, Chile, Colombia
, Peru and Argentina slipped between
0.55 percent and 1.17 percent. The Brazilian real, which
has underperformed other regional currencies in recent weeks,
bucked the trend and was up slightly.
    Continued uncertainly over high-stakes talks over the North
American Free Trade Agreement, known as NAFTA, also weighed on
Mexico's currency, as well as its S&P/BMV IPC index. 
    Mexican Economy Minister Ildefonso Guajardo said the talks
would likely continue into next week.
    The market moves reversed a recent upward trend in
emerging-market currencies that followed U.S. President Donald
Trump criticizing the Federal Reserve's interest rate hikes
earlier this week, in an interview with Reuters.
    Minutes from the Fed's last policy meeting, published on
Wednesday, hinted at a September rate hike, as largely expected.
    Brazil's benchmark Bovespa index fell 1.65 percent, as
shares of financial firms led losses, including Itau Unibanco
, Brazil's largest bank by total assets, which closed
down nearly 4 percent. 
    Argentina's MerVal index also lost value on Thursday, down
1.2 percent.
    Government statistics agency Indec reported earlier on
Thursday that Argentina's economy contracted 6.7 percent in June
compared with the same month last year, the latest indication
the South American country is headed for recession.
    Key Latin American stock indexes and currencies at 2032 GMT:
 Stock indexes            Latest      Daily pct    YTD pct
                                         change     change
 MSCI Emerging Markets      1,048.20      -0.23      -9.52
 MSCI LatAm                 2,480.75      -0.99     -12.28
 Brazil Bovespa            75,633.77      -1.65      -1.01
 Mexico IPC                49,749.56      -0.26       0.80
 Argentina MerVal          26,549.98       -1.1     -11.69
 Colombia IGBC             12,157.83      -0.03       6.92
 Venezuela IBC            454,940.88      10.71  35,916.66
 Currencies               Latest      Daily pct    YTD pct
                                         change     change
 Brazil real                  4.1175       0.09     -19.53
 Mexico peso                 18.9525      -1.17       3.94
 Chile peso                      669      -1.13      -8.12
 Colombia peso              2,982.71      -0.79      -0.02
 Peru sol                      3.302      -0.55      -1.97
 Argentina peso              30.4400      -0.62     -38.90
 Argentina peso                30.95      -0.65     -37.87

 (Additional reporting by Claudia Violante in Sao Paulo and
David Alire Garcia in Mexico City; editing by Dan Grebler and
Rosalba O'Brien)
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