July 19, 2019 / 8:21 PM / 3 months ago

EMERGING MARKETS-Dollar recovery halts gains in Latam currencies

 (Updates prices, adds market analysts comment)
    By Sruthi Shankar
    July 19 (Reuters) - A U.S. dollar recovery put most Latin
American currencies under pressure on Friday while Brazil's
Bovespa stock index led losses in the region's equity markets.
    The MSCI index of Latin American currencies
edged lower as the dollar swung to gains after the New York
Federal Reserve walked back dovish comments from its president,
which had bolstered expectations of an aggressive interest rate
cut this month.
    Traders expect the U.S. central bank to cut rates by 25
basis point next week, although they have scaled back bets of a
bold 50 basis-point cut.
    Emerging markets have enjoyed a strong run-up this year as
expectations of monetary policy easing from central banks to
counter the impact of U.S.-China trade war on economic growth,
encouraged inflows into risky, developing world assets.
    "We stay bearish on the US dollar but put most focus versus
high-carry emerging market currencies, helped by global central
bank easing," Morgan Stanley analysts wrote in a note.
    "We think the most topical market question is not whether
the Fed will cut 25bp or 50bp in July, but if it is enough to
stop global growth weakness."
    The Brazilian real gave back most of its gains made
on Thursday, pulling the currency into the red for the week. The
real has climbed about 10% since its May low as investors
cheered progress in the government's pension reform bill.
    Investors are now looking forward to the unveiling of an
economic stimulus package on July 24, which was announced by
President Jair Bolsonaro's administration to revive flagging
growth in Latin America's largest economy.
    Heavyweight Sao Paulo-traded stocks led losses, down
over 1% with financials weighing on the benchmark.
    Mexican stocks edged higher with mining giant Grupo
Mexico providing the biggest boost after President
Andres Manuel Lopez Obrador said he will seek an agreement with
the company before making any "drastic decision" after a recent
spill of sulfuric acid in the Gulf of California.
    Stocks in Colombia rose 0.5% and the peso
steadied as prices of oil, the country's top export, gained on
rising tensions between the United States and Iran. 
    Chile's peso slid about 0.8% after its central bank
said on Thursday it would keep the interest rate steady at 2.5%,
in line with market expectations, but noted that pressures were
rising that could warrant further cuts.
    
    Latin American stock indexes and currencies at 1952 GMT:
 Stock indexes                       daily %
                            Latest    change
 MSCI Emerging Markets      1057.00      0.5
                                     
 MSCI LatAm                 2910.14    -0.82
                                     
 Brazil Bovespa           103490.94    -1.17
                                     
 Mexico IPC                41679.05     0.15
                                     
 Chile IPSA                 5047.35     0.12
                                     
 Argentina MerVal          40241.96    -1.25
                                     
 Colombia IGBC             12924.74     0.52
                                     
                                            
 Currencies                          daily %
                                      change
                             Latest  
 Brazil real                 3.7467    -0.73
                                     
 Mexico peso                19.0198    -0.40
                                     
 Chile peso                  688.09    -0.88
                                     
 Colombia peso                 3171     0.03
                                     
 Peru sol                     3.282     0.12
                                     
 Argentina peso             42.2800    -0.42
 (interbank)                         
                                     
     

 (Reporting by Sruthi Shankar in Bengaluru; editing by Grant
McCool)
  
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