October 24, 2019 / 8:18 PM / 8 months ago

EMERGING MARKETS-Latam FX hits pause as dollar gains favor

 (Updates market price)
    By Sruthi Shankar
    Oct 24 (Reuters) - The Brazilian real and the Mexican peso
held near recent highs on Thursday as the dollar gained favor
amid renewed concerns about U.S.-China trade talks and a further
delay to the Brexit deal.
    After a recent run of gains on optimism over the final
approval of Brazil's pension reforms bill, the real
steadied at 4.04 per dollar. The currency had hit a two-month
high of 3.99 per dollar earlier in the session.
    The Mexican peso pulled back 0.2%, but held near a
three-month high hit earlier this week, while the Colombian peso
 and the Argentine peso slipped.
    The sentiment soured as U.S. Vice President Mike Pence
accused China of curtailing "rights and liberties" in Hong Kong
in a wide-ranging critique of Beijing's behavior.
    His closely watched speech came ahead of a new round of
talks between Treasury Secretary Steven Mnuchin and Chinese
officials on Friday to try to end a bruising trade dispute.
    Meanwhile, the dollar strengthened against the pound after
Britain's Prime Minister Boris Johnson called on for a general
election on Dec. 12 to break Britain's Brexit impasse, conceding
for the first time he will not meet his "do or die" deadline to
leave the European Union next week.
    Positive developments on both fronts had supported emerging
market assets since early October, pushing the MSCI index of
Latin American currencies and its stocks
counterpart to multi-month highs.
    "At these levels, significant optimism has already been
priced into markets. We are skeptical that the USD pullback can
extend," Ben Randol, a strategist at Bank of America Merrill
Lynch, wrote in a note.
    "Within the context of a fragile global economy, there has
been lack of progress on structural policy matters needed to
reduce the elevated state of global uncertainty."
    Brazilian markets rallied this week on expectations of a
final vote by the Senate to a sweeping overhaul of the country's
pension system aimed at stabilizing public finances and boosting
    The main Bovespa index pulled back 0.4% after
hitting a record high on Wednesday, with steelmaker Companhia
Siderurgica Nacional sliding 7% to the bottom after
reporting a quarterly net loss and cutting its 2019 profit
    Mexican shares steadied, helped by gains in the
country's largest retailer, Walmart de Mexico on the
back of a quarterly profit beat. Cement maker Cemex
 slumped 7% after reporting a fall in net sales.
    Chile's currency climbed after the central bank
delivered a third major rate cut since June after the market
close on Wednesday, in line with market expectations. 
    The bank cut the benchmark interest rate by a quarter of a
percentage point to 1.75% and said raging protests that have
engulfed the country will have an economic impact.
    The Argentine peso weakened even as the central bank
sold $346 million of its reserves to stem the currency's slide,
three days ahead of a presidential election that has increased
uncertainty over an economy already ailing from recession.

   Key Latin American stock indexes and currencies at 1951 GMT:
       Stock indexes                 Latest       Daily %
 MSCI Emerging Markets                 1036.33          0.52
 MSCI LatAm                            2788.14           0.5
 Brazil Bovespa                      107089.12         -0.42
 Mexico IPC                           43678.14           0.3
 Chile IPSA                            5014.95          2.13
 Argentina MerVal                     33293.60         1.582
 Colombia IGBC                        13108.12         -0.16
           Currencies                Latest       Daily %
 Brazil real                            4.0405         -0.21
 Mexico peso                           19.1380         -0.16
 Chile peso                              723.8          0.28
 Colombia peso                         3404.05         -0.37
 Peru sol                               3.3478         -0.08
 Argentina peso (interbank)            59.4500         -0.76

 (Reporting by Sruthi Shankar and Susan Mathew in Bengaluru
Editing by Paul Simao and Alistair Bell)
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