August 6, 2019 / 7:49 PM / 3 months ago

EMERGING MARKETS-Latam FX recover from tumble as China eases currency war fears

 (Updates prices)
    By Susan Mathew
    Aug 6 (Reuters) - Latin American currencies made a strong
comeback on Tuesday after days of losses as some fears of a
worsening in trade tensions between the United States and China
were allayed after China stepped in to stabilize its currency.
    Major Latam currencies rose between 0.3% and 0.9% against a
stronger dollar as some risk appetite returned after China set a
higher-than-expected fix for its currency. 
     This assuaged investors who feared Beijing would let its
currency slump to tackle further tariffs threatened by the
United States, turning their trade war into a currency war. 
    Brazil's real rose half a percent, on track to end a
six-session losing streak, and Mexico's peso rose for the
first time in five sessions, while Colombia's peso
recovered from all-time lows. 
    The recovery comes after trade tensions escalated last week
when U.S. President Donald Trump abruptly ended a truce period
by threatening a 10% tariff on the remaining $300 billion of
Chinese imports, sending markets worldwide into a tizzy.
    Emerging market currencies had hit their 2019 lows on Monday
when China's yuan was allowed to slip below its 7 per dollar
level. 
    "Gradually we think that USDCNY might reach 7.15-7.30,
assuming that the trade-weighted yuan were to depreciate by a
further 3-5%," analysts at Morgan Stanley analysts wrote in a
note. 
    Regional stocks rose after five days of
losses, with Sao Paulo-traded stocks leading with an almost 2%
jump.
     Minutes from the Brazilian central bank's last meeting,
when it cut interest rates by 50 basis points, reaffirmed the
view that there is more room for monetary adjustment with
economic growth staying stable or growing only slightly in the
second quarter.
    "Markets are already pricing in almost 75 basis points
(cuts) into year-end, so further cuts should not come as a
surprise," Morgan Stanley analysts wrote. 
     Hamburger producer Marfrig Global Foods was the
biggest gainer on Brazil's main index after it said it reached
an agreement with U.S.-based agribusiness company Archer Daniels
Midland to produce and market vegetable protein products
in Brazil.
    Argentine and Mexican shares also rose,
almost 1%, breaking five straight days of declines. 
    
    Key Latin American stock indexes and currencies at 1906 GMT:
 
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets          973.06      0.01
                                        
 MSCI LatAm                    2701.81      1.45
                                        
 Brazil Bovespa              102008.44      1.91
                                        
 Mexico IPC                   39859.58      0.91
                                        
 Chile IPSA                    4790.02       0.2
                                        
 Argentina MerVal             41298.78         1
                                        
 Colombia IGBC                12381.56      1.06
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.9563      0.55
                                        
 Mexico peso                   19.5541      0.28
                                        
 Chile peso                      715.9      0.64
                                        
 Colombia peso                 3425.48      0.80
 Peru sol                        3.375      0.33
                                        
 Argentina peso                45.2900      0.44
 (interbank)                            
                                        
 

    
 (Reporting by Susan Mathew in Bengaluru; Editing by Dan
Grebler)
  
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