May 31, 2019 / 3:14 PM / a year ago

EMERGING MARKETS-Mexican peso weakens after Trump tariff blow

    By Susan Mathew
    May 31 (Reuters) - Most Latin American currencies weakened
on Monday, with Mexico's peso sliding to its lowest in about
five months after U.S. President Donald Trump vowed to impose
tariffs on all Mexican imports.
    The Mexican peso slipped up to 3.6% and remained on
course to post its worst day in seven months. The currency had
been poised to log a 1% monthly decline, but Friday's moves take
May's loss closer to 4%. 
    Mexican shares fell 1.6%.
    Trump said he would impose a 5% tariff on all Mexican
imports from June 10, a rate that would rise each month till it
reaches 25% in October, and remain in place until Mexico stops
the inflow of illegal immigrants into the United States via the
southern border.
    "The problem here is that the Mexican government will find
it difficult to meet Trump's demands," said Commerzbank FX
Strategist Thu Lan Nguyen, noting compromises that Canada and
Mexico had to make in negotiating their new trade deal with the
United States. 
    Mexican President Andres Manuel Lopez Obrador said he would 
respond with "great prudence," adding there was no point in
coercive measures. Foreign Minister Marcelo Ebrard is to lead a 
delegation to Washington on Friday for talks.
    "The risk of a less-than-sufficient response is high," said
Morgan Stanley strategists, adding they expect the Mexican peso
to trade well above 20 to the U.S. dollar in the days to come.
The peso was last trading at 19.6605 per dollar.
    This comes as economic growth in Mexico shrank in the first
quarter and on Thursday the central bank subsequently revised
its 2019 growth outlook lower for Latin America's No. 2 economy.
    Brazil's real firmed 1.5% against a weaker dollar.
    Investors who were long Brazil's real against Mexico's peso
saw their position - a popular one among Wall Street
traders - swell about 4% in value, set for the biggest daily
gain in close to a year. 
    Brazil posted a primary fiscal surplus of 6.64 billion reais
($1.68 billion) in April, slightly more than the 6.00 billion
reais surplus economists had expected.
    The Colombian peso dipped 0.4%, against a backdrop of
tumbling oil prices. The currency touched its lowest since
February 2016. 
    Colombia's central bank is expected to keep borrowing costs
unchanged at 4.25% at its rate meeting later in the day. 
    Key Latin American stock indexes and currencies at 1439 GMT
          Stock indexes                    Latest    Daily %
 MSCI Emerging Markets                       997.80      0.29
 MSCI LatAm                                 2688.88      -0.1
 Brazil Bovespa                            97942.27       0.5
 Mexico IPC                                42648.65     -1.61
 Chile IPSA                                 4934.20         0
 Argentina MerVal                          33971.00     -0.78
 Colombia IGBC                             12007.82     -0.58
              Currencies                   Latest    Daily %
 Brazil real                                 3.9251      1.35
 Mexico peso                                19.6490     -2.62
 Chile peso                                  708.73      0.14
 Colombia peso                              3375.99     -0.39
 Peru sol                                      3.37     -0.15
 Argentina peso (interbank)                 44.8000     -0.45
 (Reporting by Susan Mathew in Bengaluru; Editing by Bernadette
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