August 28, 2019 / 3:18 PM / 23 days ago

EMERGING MARKETS-Latam FX weakens as U.S. recession worries come to fore

    By Sruthi Shankar
    Aug 28 (Reuters) - Latin American currencies weakened
against the dollar on Wednesday amid worries about the U.S.
economy slipping into recession in the face of a bruising trade
war with China.
    The Brazilian real dropped 0.5% to trade at 4.1527
per dollar, on course to give up gains made on Tuesday after the
central bank sold dollars in the spot market, intervening for
the first time in 10 years as the currency hit its weakest level
in almost a year.
    The central bank also announced plans to sell up to $1.5
billion in the spot market on Wednesday but with repurchase
commitments, on top of a planned $550 million spot market sale.
    "We think the USD sale will help slow down the pace of BRL
depreciation as spot gets close to 4.20, but will not be able to
hold it back if the external environment remains unfavorable,"
Citi's Dirk Willer wrote in a client note.
    A deepening inversion of the U.S. yield curve, considered a
classic recession signal, raised fears of global economic
downturn as the United States and China showed little signs of
backing off their trade war that has roiled financial markets.

    The U.S. Trade Representative's office reaffirmed President
Donald Trump's plans to add an additional 5% tariff on a $300
billion list of Chinese imports starting on Sept. 1 and Dec. 15.

    The Mexican peso held flat ahead of a key inflation
data, while currencies of Colombia and Chile fell
about 0.2%. 
    The Argentine peso dropped about 3% and bonds prices
fell as the central bank sold $115 million of its reserves in
two interventions aimed at controlling the peso's fall.

    Worries about the country's ability to meet its
dollar-denominated debt obligations since the peso got trounced
by political uncertainty after an Aug. 11 primary election.
    A jump in oil prices supported most stock markets, with
Brazil's Bovespa and Colombian equities gaining
about 0.4%.
    
    Latin American stock indexes and currencies at 1436 GMT: 
    
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       964.37    -0.02
                                     
 MSCI LatAm                 2498.94      0.5
                                     
 Brazil Bovespa            97695.97     0.43
                                     
 Mexico IPC                40777.03     0.32
                                     
 Chile IPSA                 4601.49    -0.08
                                     
 Argentina MerVal          25379.80    3.076
                                     
 Colombia IGBC             12448.94     0.46
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 4.1527     0.52
                                     
 Mexico peso                20.0030    -0.07
                                     
 Chile peso                   724.7    -0.30
                                     
 Colombia peso              3475.61    -0.24
                                     
 Peru sol                     3.395    -0.06
                                     
 Argentina peso             57.7500    -2.51
 (interbank)                         
                                     
 

 (Reporting by Sruthi Shankar in Bengaluru
Editing by Alistair Bell)
  
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